Cannabis Chart Of The Week: Analysts Have Reasonable Expectations, Leaving Room For Upside Surprises

The graph depicts consensus analyst expectations for the ten largest MSOs that have consistent 2023 and 2024 estimates, including Curaleaf CURLF, Green Thumb GTBIF, Verano VRNOF, Trulieve TRUL, Cresco CRLBF, TerrAsced TRSSF, Columbia CCHWF, Ascend AAWH, Jushi JUSHF, and AYR AYRWF.

We never thought we would say it, but analysts don’t seem overly aggressive with their revenue or EBITDA margin assumptions for 2023 or 2024. We have always believed that a cessation of downward revisions was necessary for creating a market bottom. Are we finally there? In our opinion, current estimates leave room for upside surprises.  

The light green line shows the history of 2023 consensus revenue estimates from the beginning of 2023 as a percentage of actual 2022 revenues. At the start of the year, analysts projected 2023 revenues to be 15% higher than actual 2022 revenues. These estimates have been steadily revised downward, and currently, revenues for the group are projected to be only 2% higher than 2022. 

The dark green line shows 2024 revenue expectations as a percentage of 2022 actuals. At the beginning of 2023 analysts were forecasting 2024 revenues to be 33% higher than 2022, whereas analysts are now expecting 2024 revenues to be only 12% higher than 2022’s, a CAGR of 5.8%.

Analysts are conservative with their revenue projections, balancing the negative impacts of continued wholesale price compression against the positive impetus from new medical and adult rec states.

The light blue line shows analyst EBITDA margin estimates for 2023, which began the year at 27% but have been cut to 24%, slightly below 2022 margins of 25%. We are not convinced these margins are conservative enough, but recent pricing strength in Massachusetts, Michigan, and California may prove them right.

The dark blue line shows analyst EBITDA estimates for 2024, which started at 28% and have only been cut to 27%. We are a bit wary of improving margin forecasts given our expectations of a recession and continued capital markets tightness. However, these projections are not overly heroic.

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 provides the market intelligence that cannabis companies, investors, and acquirers utilize to make informed decisions regarding capital allocation and M&A strategy. The Deal Tracker is a proprietary information service that monitors capital raise and M&A activity in the legal cannabis, CBD, and psychedelics industries. Each week the Tracker aggregates and analyzes all closed deals and segments each according to key metrics:

• Deals by Industry Sector (To track the flow of capital and M&A Deals by one of 12 Sectors - from Cultivation to Brands to Software)

• Deal Structure (Equity/Debt for Capital Raises, Cash/Stock/Earnout for M&A) Status of the company announcing the transaction (Public vs. Private)

• Principals to the Transaction (Issuer/Investor/Lender/Acquirer) Key deal terms (Pricing and Valuation)

• Key Deal Terms (Deal Size, Valuation, Pricing, Warrants, Cost of Capital)

• Deals by Location of Issuer/Buyer/Seller (To Track the Flow of Capital and M&A Deals by State and Country)

• Credit Ratings (Leverage and Liquidity Ratios)

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.