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 04/14/2023
Viridian Capital Chart of the Week: MSO EBITDA Expectations Last Year vs. Now
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- The graph shows the top 13 MSOs that have released final 2022 results, arranged by market cap. Note: Curaleaf (CURA: CSE) has delayed its earnings release and is not on the chart.
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- The blue bars show analysts’ consensus estimates of 2022 Adjusted EBITDA as of 4/7/22. The red bars depict actual 2022 Adjusted EBITDA, and the green bars show consensus 2023 estimates as of 4/7/23.
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- 2022 Consensus Estimates missed the mark by a wide margin. Schwazze (SHWZ: OTC) was the only company on the graph that beat estimates. Five MSOs estimates were over 100% too high, and, in total, the estimates were 45% higher than actuals. One could have done much better by simply annualizing 4th qtr 2021 results; the error would have only been 9%.
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- In fairness to the analysts, the industry confronted serious headwinds in 2022 that were not apparent or appreciated.
- Analysts were not anticipating the deleterious impacts on margins from inflationary cost increases and supply-side tangles.
- Wholesale prices plunged in several markets, including Massachusetts, Michigan, Colorado, Oregon, and California.
- Several key East Coast adult-use markets got later than expected starts. New York was scheduled to commence in January 2022 and only got off to a minimal begin in January 2023.
- In fairness to the analysts, the industry confronted serious headwinds in 2022 that were not apparent or appreciated.
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- So how do expectations look for 2023? Analysts reduced consensus 2023 EBITDA estimates for the companies on this chart by 11.75% in March. Estimates are nearly 25% lower than 2022 estimates and only 9% higher than 2022 actuals.
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- Although we are cautiously optimistic that sell-side analysts have found religion, we refer to the Airport Flight Delay Theorem. When you are waiting for your flight to board, and they announce a delay, have you ever noticed that they often come back and report a further delay? They weren’t conservative enough in their initial estimates, so they had to revise downward again. The same thing happens with corporate earnings guidance and analysts’ estimates. Neither wants to cut too much, so they often do not cut enough.
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- 2023 consensus EBITDA estimates for this group are now only 12% higher than annualized 4th quarter 2022 numbers. Perhaps that leaves some room for upside surprises?
