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Canaccord Genuity analyst Matt Bottomley made “meaningful” reductions to his financial forecast for Ayr Wellness Inc. (AYR.A-CN) after the Miami-based multi-state cannabis operator reduced its forecast for the remainder of the year.
“Following a flat Q2 (although largely expected), management lowered its remaining FY2022 growth expectations due to: 1) inflationary pressures on consumer spending: 2) regional supply/demand imbalances weighing wholesale pricing; 3) lower wholesale penetration; and 4) need for stronger execution in some areas of the business,” he said.
Ayr is now expecting revenue, adjusted EBITDA and operating income to grow 10 per cent between the second and third quarters and “an acceleration in the pace of sequential growth in Q4 2022.”
“This compares to its previous guidance of Q4/22 revenue and adj. EBITDA of approximately US$200-million and more than US$60-million (31-per-cent margin), respectively,” said Mr. Bottomley. “Based on the above commentary, we expect the company to achieve Q4/22 revenues of more than US$145-million and adj. EBITDA of US$30-million-US$35-million (more than 22-per-cent margin).
“Although H2/22 growth is anticipated to have a slower ramp vs. previous guidance, we believe the core growth drivers communicated by management nonetheless remain in place, including: 1) the launch of adult-use sales in New Jersey (which contributed to only 16 days in the quarter); 2) the opening of its first two recreational stores in Massachusetts subsequent to period end; 3) sales from its 80,000 sq. ft. Arizona facility expansion; and 4) additional retail openings in Florida and Pennsylvania.”
With lower revenue and earnings expectations for 2022 and 2023, Mr. Bottomley cut his target for Ayr shares to $30 from $40, reiterating a “buy” rating. The current average on the Street is $36.40.