Marijuana Company Verano Holdings Worth $2.1B, Outprices Its Expected 2024 Earnings

Despite facing retail pressures, especially in New Jersey, which is leading to an expected 5-7% dip in Q1 2024 sales, Verano Holdings VRNOF is still poised for growth, says senior analyst Pablo Zuanic.

State-Level Dynamics And Retail Insights

In a recent report, Zuanic provides a close look at Verano's performance across key states, with seven of them accounting for 88% of its total retail sales of $185 million in Q4 2023.

Florida stands out as a bright spot, with an 11% sequential increase in retail sales, thanks to the addition of four stores and an overall improvement in revenue per store.

This contrasts with Illinois, where a 5% sales decrease was noted, albeit in a market that grew by 2.7%. According to the report, the influx of new store openings has diluted revenue per store figures across the industry.

In New Jersey, Verano saw a significant 13% decrease in sales, attributed to the rapid increase in retail outlets, which has intensified competition.

Meanwhile, in states like Arizona and Pennsylvania, this cannabis multi-state operator (MSO) experienced sales declines. That said, in Maryland and Connecticut it reported positive growth, highlighting the varied market conditions across Verano's operational landscape.

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Financial Outlook And Market Valuation

Despite the mixed retail environment, Verano's stock has shown resilience, with a 16% increase over the past 90 days, albeit lagging behind the broader MSOS ETF's MSOS 23% gain.

The company's current valuation, with a spot enterprise value (EV) of $2.1 billion, positions it at a premium in the market, trading at 2.2x the FactSet consensus for sales in the 2024 calendar year. 

This valuation underscores the analyst's confidence in Verano's growth potential, particularly in states poised for recreational market expansion.

Looking Ahead: Catalysts And Market Opportunities

The report identifies rescheduling and the SAFER Banking Act as potential macro catalysts that could shape the sector's future. However, given the cautious stance of the Biden administration on cannabis reform, immediate significant changes seem unlikely. Instead, state-level developments, such as the potential legalization of recreational cannabis in several states where Verano operates, are expected to be more immediate growth drivers.

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