Cannabis Industry Chart Of The Week: Q2 Earnings Releases Have Failed To Rally Marijuana Stocks

• Last week seven of the eleven MSOs with more than $1B market caps reported Q2 results. The chart shows the percentage difference between actual Revenue and EBITDA versus consensus analyst estimates, and the percent change of the stocks post announcement.  

We have chosen to omit Harvest Health and Rec in the graph. The company’s stock price is tied to Trulieve’s by the announced .117 exchange ratio plus a risk arb spread (approximately 4% at Friday’s close).

• Revenues exceeded expectations for every company shown except Columbia Care.

• The EBITDA results were a mixed bag relative to expectations. Trulieve, GTI and Curaleaf beat expectations but only GTI’s stock increased on the news.  

• Despite, the revenue beats and reasonable earnings performance, the stocks were down an average of 3.0%, slightly less than the 5.3% drop in the MJ Alternative Harvest ETF. Lack of visible progress on federal legalization initiatives or even more moderate measures like the SAFE Act, appears to be weighing on the market. 

• The drifting stock prices belies financial performance that is remarkable:  

  • Year over year revenue growth averages 140% and ranges from 78% for Trulieve to 232% for Columbia Care.  

  • EBITDA margins average 30.4% and range from 15.0% for Columbia Care to over 40% for both Verano and Trulieve.

  • Cash levels are at near records, averaging $250 million for the group and ranging from $135M for Verano to $359M for GTI. 

  • Leverage is quite low: gross debt + leases represents only 1.1x annualized EBITDA and we estimate (based on an assumed debt capacity of 3x EBITDA) that the group has an aggregate untapped debt capacity of approximately $3B.

• Viridian Capital Advisors Equity Research has been pointing to great values in the 2nd tier MSOs, but we believe the larger competitors offer good value as well, particularly for companies that are successful in consolidation.

See also: Governor Transition To Smooth NY Cannabis Roll-Out

The Viridian Capital Chart of the Week highlights key investment, valuation and M&A trends taken from the Viridian Cannabis Deal Tracker.

The Viridian Cannabis Deal Tracker is a proprietary information service that monitors capital raise and M&A activity in the legal cannabis and hemp industry. Each week the Tracker aggregates and analyzed all closed deals and segments each according to key metrics:

• Industry Sector (one of 12 sectors, from Cultivation to Brands)

• Dollar value of the transaction

• Region in which the deal occurred (country or U.S. state)

• Status of the company announcing the transaction (Public vs. Private)

• Deal structure (equity vs. debt)

• Key deal terms (Pricing and Valuation)

The Viridian Cannabis Deal Tracker provides the market intelligence that cannabis companies, investors, and acquirers utilize to make informed decisions regarding capital allocation and M&A strategy.

 Since its inception in 2015, the Viridian Cannabis Deal Tracker has tracked and analyzed more than 2,500 capital raises and 1,000 M&A transactions totaling over $50 billion in aggregate value.

The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.