What Will Drive Columbia Care's Future Growth? Analyst Opines Post Positive Q3 Earnings

Columbia Care Inc. CCHW CCHWF 3LP reported its financial results Friday for the third quarter ended September 30, revealing record quarterly revenue of $132.3 million, up by 144% year-over-year and 21% sequentially.

Adjusted EBITDA came in positive with a record $31.02 million, up by 634% from $4.22 million in the same period of 2020. Adjusted Gross profit was $64.46 million, compared to $21.16 million in the third quarter of the prior year.

The Analyst

Cantor Fitzgerald’s Pablo Zuanic reiterated ‘Overweight’ rating and price target of $5.20 on Columbia Care’s stock.

The Thesis

The company's sales and EBITDA missed both Cantor Fitzgerald and FactSet's consensus estimates and its expected fourth-quarter growth, which is partly dependent on the opening of New Jersey’s recreational market as well as the bolstering of medical flower in New York, Zuanic wrote in his Friday analyst note.

Columbia Care revised its revenue guidance from $500-$530 million to a new range of $470-$485 million, and its adjusted EBITDA projections, which were previously $95-$105 million to $85-$95 million.

In spite of revised guidance and missed estimates, Zuanic wrote that he trusts the company is well placed to benefit as several East Coast markets, such as New Jersey, New York and Virginia, begin adult-use cannabis sales. The analyst further highlighted that the company’s advantages also include the synergy and vertical integration benefits of recent deals – especially Green Leaf Medical.

“Despite the sales miss, EBITDA margins were about 200bp better than expected, a) in part due to the benefit of recent acquisitions (like Green Leaf), and b) the company’s discipline in sitting out price skirmishes.”

Even though Columbia Care lacks exposure to mature and competitive states like Colorado and California, and also depth in some regions, its position in “emerging” recreational states like New Jersey, New York and Virginia and its footprint could be attractive to Canadian licensed producers.

Price Action

Columbia Care’s shares traded 7.76% higher at $3.47 per share at the time of writing Friday morning.

Photo: Courtesy of CRYSTALWEED cannabis on Unsplash