CanaccordSurprised at his target. GLTA
With its shares down more than 60 per cent since early November, Canaccord Genuity analyst Matt Bottomley thinks increased concerns about Ayr Wellness Inc.’s (AYR.A-CN) ability to manage its debt load “make the prospect for a material valuation re-rating more speculative in nature.”
That led him to lower his recommendation for the Miami-based cannabis multistate operator to “speculative buy” from “buy,” citing heightened balance sheet risks for the company in the current macro-environment.”
Mr. Bottomley said the change was not in reaction to Friday’s announcement that Ayr has decided to terminate its US$55-million acquisition deal for Dispensary 33, an Illinois-based cannabis operator with two dispensaries in the Chicago area.
“Although we believe Illinois represents one of the most attractive recreational cannabis markets in the U.S. today, we view [Friday’s] announcement as likely net positive,” he said. “Given overall industry growth headwinds and a balance sheet that still houses more than US$500-million of long-term debt, we believe the termination of the deal provides more breathing room for the company to navigate towards profitability while freeing up US$15-million of net cash. Further, note that back in May/22, Ayr closed its original deal in Illinois (Herbal Remedies), which included two adult-use locations in the state.”
His target for Ayr shares dropped to $16.50 from $21. The average is $21.14.