Ayr Wellness Inc. AYRWF reported its financial results Thursday for the fourth quarter and full year of 2022, with annual revenue of $465.6 million and increase of 30.3% compared to $357.6 million in 2021.
Q4 2022 Financial Highlights
- Fourth quarter revenue reached $124.6 million, up by 11.5%, which compares to $111.8 million in the fourth quarter of 2021.
- Gross profit was $55.1 million, an increase of 7.6% compared to $51.2 million in Q4 2021
- Operating loss was $176.2 million, compared to a loss of $13.9 million in Q4 2021.
- Adjusted EBITDA was $26 million, a decrease of 0.5% compared to $26.1 million in Q4 2021.
The Analyst
Cantor Fitzgerald’s Pablo Zaunic kept a ‘Neutral’ rating on Ayr Wellness stock reducing the price target to $1 from $1.38 to address reduced estimates and sectoral derating.
The Thesis
The cannabis company has reined in its expansion plans – dropped out of a deal to acquire shops in Illinois, is exiting Arizona and is putting its efforts in states where it's better positioned and enjoys better economics. Furthermore, Ayr Wellness is now concentrating on improving profitability and cash flow.
In addition to new stores in Florida and buying shops in Ohio, expansion plans for the fiscal year 2023 are somewhat on pause though there’s a possibility the company could enter Connecticut via partnership. “We think all this makes sense,” said Zuanic who is a speaker at April’s Benzinga Cannabis Capital Conference in Miami.
On the other hand, Ayr Wellness's balance sheet appears stretched versus the peer group, and share-based compensation is above the peer group, writes the analyst.
“The debt load is even higher if we factor tax payables and contingent debt. On our numbers, Ayr Wellness trades at only a slight discount to the MSO average. In terms of risk-reward, we prefer other stocks in the multi-state operators' group.”
The main risk for this cannabis stock is debt leverage and cash flow.
Price Action
Ayr Wellness shares closed Thursday market session 14.74% lower at 81 cents per share.
Photo: Courtesy of Avery Meeker on Unsplash
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