Ascend Wellness Holdings (Ascend Wellness Holdings Stock Quote, Chart, News, Analysts, Financials CSE:AAWH) may have reported mixed Q1 results, but Ventum Capital Markets analyst Andrew Semple is high on the stock, maintaining his “Buy” rating and US$2.75 target, citing cost savings, improving margins and long-term growth potential in key U.S. cannabis markets.
Ascend Wellness is a U.S. cannabis company that grows and sells both medical and recreational products. It focuses on large, limited-license states where it can control the whole supply chain. The company is a market leader in Illinois and is expanding in New Jersey, Ohio, Massachusetts, Michigan, Pennsylvania and Maryland.
In his May 13 corporate update, Semple said the company reported Q1/25 mixed results relative to Ventum’s estimates.
“Sales continued to trend below our expectations, as competitive and pricing pressures were more intense than expected. Conversely, we were pleased to see EBITDA outperform due to larger-than-expected cost savings.”
He said Ascend expects Q2/25 results to be about the same as Q1, which matches what others in the industry are seeing. However, that also shows how pricing pressure affects the market since Q2 sales are usually stronger than Q1.
“We remain pleased by the new management team’s plan to improve operating performance and profitability,” he said. “Ascend continues to aim for growth through 10 new store openings and over 150 new branded product SKUs planned for launch in 2025. Management has also implemented $30M of cost-cutting measures.”
Semple said these efforts should boost earnings by the second half of 2025, once the new stores are up and running and the latest products gain traction. He added that Q1 results don’t yet show the full impact of earlier cost cuts and efficiency improvements, since Ascend is still selling off older, higher-cost inventory.
“We expect this to be a tailwind to H2/25 margins and earnings,” he said.
Ascend’s main goals for the year include improving margins and profitability by focusing on more efficient production and higher-margin branded products. The company also plans to grow its retail presence in key markets, with 10 new stores expected in 2025 and more over time. Another priority is achieving consistent, positive cash flow.
“Q1/25 results showed positive internal progress towards these objectives, partly offset by more challenging market conditions,” Semple said.
Semple thinks that Ascend Wellnes will generate $106.8-million in Adjusted EBITDA on $521.1-million in revenue in fiscal 2025. He expects those figures to improve to $112.8-million in Adjusted EBITDA on $536.4-million in revenue in fiscal 2026
Ventum is keeping its rating and $2.75 price target, based on a valuation of $2.69 per share, down from $2.98. The lower value reflects weaker financial forecasts, primarily due to more challenging market conditions.
“We believe Ascend is an attractive investment opportunity in US cannabis, with the company possessing a balance between quality (e.g., relatively under-levered balance sheet, relatively robust operating performance, high-quality limited-license markets) and torque to upside from state and federal catalysts,” Semple said.
Disclosure: Cantech Letter’s Nick Waddell owns shares of Ascend.
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About The Author /
Rod Weatherbie is a journalist based in Prince Edward Island. Since 2004, he has written extensively about the Canadian property and casualty insurance landscape. He was also a founder and contributing editor for a Toronto-based arts website and a PEI-based food magazine. His fiction and poetry have been featured in The Fiddlehead, The Antigonish Review, and Juniper.
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