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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 06/09/2023

Viridian Capital 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 (CURA: CSE), Green Thumb (GTII: CSE), Verano (VRNO: CSE), Trulieve (TRUL: CSE), Cresco (CL: CSE), TerrAsced (TER: CSE), Columbia (CCHW: CSE), Ascend (AAWH: OTCQX), Jushi (JUSHF: OTCQX), and AYR (AYR.A: CSE).
  • 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.