Echelon Partners’ Andrew Semple downgraded Ayr Wellness Inc. to “speculative buy” from “buy” with a $10 target, dropping from $25 and below the $18.07 average.
“Despite our optimism on the [fourth-quarter] results, the outlook, and fundamental performance of the business, we are making some significant changes to our valuation model with this update. Ayr’s positive fundamental outlook has been overshadowed by tightening capital markets conditions and investor concerns over leverage,” he said. “We believe Ayr is now amply capitalized for 2023, though we note that it will need to refinance $243-million of senior notes due December 2024 sometime that year. With over 20 months until maturity, we believe Ayr has a sufficient window to demonstrate improved financial performance, supporting our ongoing bullish view, but we acknowledge that macro conditions outside of the Company’s control have increased the risk profile of the business and narrowed its margin of safety. We believe Ayr’s risk profile due to capital markets conditions has become more than is typical, warranting a rating revision to Speculative Buy (prev. Buy). This brings our rating for Ayr in line with other mid and small cap U.S. cannabis coverage names where we are bullish.”