Ayr Strategies Q4 Sales Miss, Vape Ban In Massachusetts Keep Cantor On Sidelines

AYR Strategies Inc. AYRSF reported a marginal shortfall in fourth-quarter sales on Wednesday, although EBITDA was in-line with expectations.

Regulatory delays in Massachusetts related to the vape ban may prevent the company from reaching its guidance for 2020, according to Cantor Fitzgerald.

The Ayr Analyst

Cantor Fitzgerald’s Pablo Zuanic maintained a Neutral rating on Ayr Strategies with an $11 price target. 

The Ayr Thesis

Ayr Strategies’ sales came in sequentially flat and gross margins contracted during the quarter due to mix issues in Massachusetts after the ban on vape products, Zuanic said in a note. 

The company reported net revenue of $32.3 million, missing the consensus estimate of $35 million. Gross margins of 47% came in short of Cantor’s estimate of 52% and down from the previous quarter’s 54%.

Ayr Strategies posted adjusted EBITDA of $9.2 million, in-line with expectations, the analyst said, adding that the company has indicated that its expansion plans for 2020 are fully funded.

Although Ayr reaffirmed 2020 guidance, this seems optimistic, with more than 70% of the acceleration in earnings growth slated to be generated in Massachusetts, Zuanic said.

Delays in the approval of store openings and in the permits for the increased capacity could “materially affect those projections,” the analyst said.

Ayr Price Action

The stock was trading 6.2% higher at $8.60 at the time of publication Thursday.