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 03/24/2023
Viridian Capital Chart of the Week: Earnings Revisions Matter More than Misses
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- The graph displays the results from 4th qtr earnings releases for the nine U.S. Cultivation & Retail sector companies reported through 3/17/23.
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- The green bars display the percentage stock price change from two days before the release to two days after, minus the percentage change in the MSOS ETF price for the same period.
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- The orange line depicts the percentage beat or miss from consensus 4th qtr. EBITDA estimates.
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- The blue line shows the percentage revisions of consensus 2023 EBITDA estimates from the beginning of March through March 17, 2023.
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- We have long believed that revisions of estimates for the year matter more than quarterly beats or misses, and the data supports our hypothesis.
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- For example, AYR (AYR.A: CSE) was the worst stock performer despite beating quarterly EBITDA estimates by 9.7%, partially because of an 8.7% downward revision in 2023 EBITDA estimates.
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- Similarly, TerrAscend (TER: CSE) had an 8.1% net stock drop despite beating the 4th qtr. EBITDA estimates by 3.4% in part because analysts revised 2023 EBITDA estimates downward by 8.4%.
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- Tilt Holdings (TILT: NEO) is the most dramatic example. The company had 4th qtr consensus EBITDA estimates of $1.9M but had an actual loss of $.4M, a 119% shortfall. Despite this significant percentage miss, TILT had the best relative performance of the group as analysts only revised the company’s 2023 downward by 1.4% to $10.6M.
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- Investors should pay less attention to quarterly beats or misses and focus on the longer term. Downward revisions of more than 8% in March for five of the nine companies on the chart are noteworthy.
