Verano Holdings is still a cheap stock, this analyst says

Beacon Securities analyst Russell Stanley said in an Oct. 1 report that Verano Holdings’s (Verano Holdings Stock Quote, Chart, News, Analysts, Financials CSE:VRNO) closing of a US$75-million secured revolving credit facility represents the largest revolver in the U.S. cannabis sector to date, improving the company’s debt profile and flexibility ahead of upcoming financial results.

Stanley reiterated a “Buy” rating and C$3.75 target price.

The Chicago-based cannabis operator runs 157 retail stores across 13 states and 15 cultivation and production facilities spanning 1.1 million square feet.

Stanley noted that the revolver, which pays SOFR plus 6% with a 4% floor and matures in September 2028, is interest-only and allows repayment in US$2.5-million increments, with proportionate release of collateral. Verano used US$50-million of the new revolver to reduce its existing US$243-million credit facility balance, which carries a higher prime plus 6.5% rate and matures in October 2026.

“This is believed to be the largest revolving credit facility in the U.S. cannabis industry to date, and it has enabled VRNO to reduce its overall blended rate, while converting a portion of its debt to revolving,” Stanley said.

Verano’s third-quarter results are scheduled for Oct. 29, with consensus calling for revenue of US$203-million and Adjusted EBITDA of US$61-million, compared with Stanley’s forecast of US$200-million and US$58-million.

“Management guided in August to second-half Adjusted EBITDA margins of roughly 30%, so that line item will be in focus,” Stanley said, adding that commentary on the October 2026 maturity and M&A environment will also be important.

At 4.2 times his fiscal 2026 Adjusted EBITDA forecast, Stanley said Verano continues to trade at a 44% discount to its large MSO peers, where the average multiple is 7.6 times. He pointed to Cresco Labs, which refinanced its major debt facility in August and trades at 6.8 times consensus fiscal 2026 EBITDA.

“We therefore view Cresco’s multiple as indicative of where VRNO should at least trade upon refinancing of its October 2026 maturity,” he said, noting that such a rerating would imply a price of about C$4.50 per share, or 135% upside.

Stanley estimates Verano will generate Adjusted EBITDA of US$242-million on revenue of US$826-million in fiscal 2025, improving to US$269-million on revenue of US$881-million in fiscal 2026.

The revolver, secured by selected real estate, provides the company a range of benefits, including lower cost debt, payoff and redraw flexibility, and optionality to have certain real estate released as collateral under the revolver.

“Closing the $75-million revolving credit facility demonstrates our focus on fortifying the balance sheet, accessing lower cost debt, and leveraging our owned real estate to strengthen our foundation and position Verano to take advantage of future opportunities,” said George Archos, Verano founder and CEO. “We view today’s closing as another important step forward in executing our capital and finance strategy that will benefit Verano, our employees and shareholders in the long term, and we look forward to making continued progress as we explore opportunities in the market.”

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