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OUR 9TH YEAR OF PROVIDING PROPRIETARY CAPITAL MARKETS INTELLIGENCE ON THE CANNABIS / HEMP / PSYCHEDELIC SECTORS

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Chart of the Week

Chart of the Week

The Viridian Capital Chart of the Week highlights key investment, valuation and M&A trends taken from that week’s Deal Tracker that we believe are impactful for investors, companies and acquirers.

Week ended 03/15/2024

Viridian Capital Chart of the Week: The Market Reacted Rationally (for a change) to 4th Qtr 2023 Earnings Releases

  • Earnings for the 4th quarter of 2023 have largely been released, and the results were generally positive, with a few exceptions. Unlike what we expected, the market reacted rationally to the EBITDA beats with a statistically significant .75 correlation between EBITDA surprises and stock performance.
  • The graph shows the % revenue beat (blue bar), the % EBITDA beat) (yellow bar), and the percent revision to 2024 EBITDA estimates (purple bar). The green line shows the net percent change in the company’s stock price from two days before the release to two days after the release after subtracting the change in the MSOS ETF for the same period.
  • The companies on the graph beat aggregate revenue estimates by 1.05% and EBITDA estimates by 7.07%.
  • Standout EBITDA beats included:
    • Green Thumb (GTII: CSE) beat EBITDA estimates by 14% due to continued strength in Maryland, driving better performance in the company’s retail segment.
    • Trulieve (TRUL: CSE) beat EBITDA estimates by 22.3%, citing firm SG&A cost control and gross margin improvements from lower production costs and reduced pressures from inventory reduction efforts.
  • However, there were also several significant EBITDA misses:
    • Marimed (MRMD: OTCQX)(MRME: CSE) missed its EBITDA estimates by around 25%, blaming the shortfall on construction delays caused by supply chain issues. The company is guiding to revenue growth of 5-7% and EBITDA growth of 0-2%, implying margin contraction. Analysts took their 2024 EBITDA estimates down by 13% but remain modestly above the company guidance.
    • Cannabist (CBST: Cboe) missed consensus EBITDA estimates by approximately 38%, blaming the shortfall on around 5% margin contraction from discounts taken to reduce excess inventories. Cannabist also mentioned that underutilization of facilities caused a similar reduction in margins. Analysts reduced 2024 EBITDA estimates by 17% on the somewhat downbeat outlook for the year, concentrating on increasing cash flow and improving the balance sheet. Cannsbist stock was down nearly 21%, while the MSOS increased by 14.5%.
    • TerrAscend (TSND: TSX) missed EBITDA estimates by 17.6%, mainly due to cultivation issues in Maryland, including a crop failure. The company guided to lower margins in Q1, and analysts reduced full-year 2024 EBITDA estimates by 16.5%
  • Analysts revised their 2024 EBITDA estimates for the group downward by approximately 1%, virtually all related to lower revenue growth. Estimates now call for 3.8% revenue growth and EBITDA margin expansion from 24.8% to 25.9%. Viridian believes there is solid potential for higher revenue growth and additional margin expansion.