What's In The Cards For These Cannabis MSOs In Q3? Analyst's Thoughts Ahead Of Earnings Season

Several cannabis multistate operators, or MSOs, are poised to report their third-quarter financials in November. Cantor Fitzgerald's analyst Pablo Zuanic weighed in with his expectations on the upcoming earnings season and took a closer look at TerrAscend Corp. TER TRSSF, Green Thumb Industries Inc GTBIF and Curaleaf Holdings Inc CURLF.

Regarding Trulieve Cannabis Corp. TRUL TCNNF Zuanic said in a previous note that some of the drivers of sentiment for marijuana companies are "SAFE Plus passage, potential copycats of Canopy Growth Corporation's Canopy USA structure (if approved by the US exchanges), sectoral M&A and (for those with international ambitions) the German legalization process."

TerrAscend Corp.

Zuanic retained a "Neutral" rating on the company's stock while lowering his 12-month price target to $2.15 from $2.85.

While the company didn't provide guidance, the management said it expects "modest sequential growth," which can be attributed to same-store sales pressures in Pennsylvania and Michigan and "overall weakness in the PA wholesale market." 

Even though the analyst expects small-scale growth in the last quarter of 2022, the following year looks promising as the company should benefit from Maryland going recreational and its wholesale operations and bolstered retail footprint in the state and nationwide.

Green Thumb Industries

Zuanic maintained an "Overweight" on the company's stock while tweaking his 12-month price target to $32 from $31.

The company's management said "flat" sequential sales would be a "best case scenario." Zuanic said that "would be better than most MSOs."

The analyst further praised GTI as one of the "best-managed MSOs" with a footprint "well-placed" for the launch of recreational sales in the states where it operates.

The company recently teamed up with Alimentation Couche-Tard Inc.'s ANCTF Circle K Stores, an American chain of convenience stores, to sell licensed cannabis at Circle K gasoline retailers in Florida.

However, Florida Health Department told the Washington Examiner that state regulators have not approved the deal. Sally Peebles, Jacksonville-based partner at the national cannabis law firm Vicente Sederberg and co-chair of the state's Medical Cannabis Advisory Committee, said that the agreement could "certainly be approved" if it complies with the statute and current rules."

Either way, Zuanic advised investors that the new partnership is "something to monitor."

Curaleaf Holdings

Zuanic retained an "Overweight" on the company's stock while tweaking his 12-month price target to $13.5 from $13.7.

Despite Curaleaf's expectations of flat sales in the third quarter, the analyst pointed to several factors that might bring the numbers down, though the most prominent was likely due to the most powerful storms to hit the United States, Hurricane Ian. The natural disaster took its toll on marijuana operators last month, including Curaleaf, which had to close roughly 70% of Florida-based stores for a few days.

On the bright side, New Jersey is expected to be a "key driver" in the third quarter, the analyst said.

"We estimate the company had a 30% share of the net wholesale market in the state and had two rec stores opened throughout 3Q," he added.

In terms of the fourth quarter and 2023 outlook, Zuanic projects that the company would benefit the most from the closing of the acquisition of Tryke Companies (dba as Reef Dispensaries), a privately held, vertically integrated MSO. With the close of the transaction, Curaleaf's national footprint has reached 29 cultivation sites and 144 dispensaries nationwide.

According to Zuanic, other factors expected to fuel Curaleaf's growth are additional store openings and seasonality, to name a few.

Price Action

TerrAscend's shares traded 2.04% lower at $1.515 per share at the time of writing on Friday.

Green Thumb's shares traded 0.81% lower at $10.96 per share at the time of writing on Friday.

Curaleaf's shares traded 1.87% lower at $5.25 per share at the time of writing on Friday.

Photo: Courtesy of geralt and Kindel Media by Pixabay