Most multistate cannabis operators will outperform the S&P500 in the year ahead, according to Cantor Fitzgerald analyst Pablo Zuanic.
A few standouts in Zuanic's Thursday note on the space include Ayr Strategies Inc. (OTCQX: AYRWF), Green Thumb Industries Inc. GTII GTBIF and Jushi Holdings Inc. JUSHF.
Ayre, which just rebranded as Ayr Wellness, is Neutral-rated by Cantor Fitzgerald. Zuanic increasd the 12-month price target from $31 to $39.
Zuanic's new estimates reflect Cantor's state-by-state market size assumptions, the analyst said.
New Jersey will begin recreational sales by January 2022 as opposed to July of this year, as previously thought, he said.
Outperformance among Ayr and other MSOs is due to the following, Zuanic said:
- Better-than-expected earnings
- Dynamics changing in the companies’ states (going from medicinal to recreational earlier than expected; economics changing due to more licenses issued and/or increased competition)
- MSO profiles changing (balance of depth vs. breadth; leveraging scale or scale triggering complexity and margin dilution; accretive vs. dilutive M&A).
Zuanic expects Green Thumb Industries Inc. GTII GTBIF sales to climb from $551 million in 2020 to almost $2 billion by 2024 as more states in the company's portfolio legalize recreational weed.
The states in question include New Jersey, New York, Connecticut, Maryland and Pennsylvania.
Ohio and Flordia will remain medical markets during that time, he said, and by 2024, five states will contribute over 80% of Green Thumb's sales — Pennsylvania, Illinois, New York, New Jersey and Nevada.
"During the 2020-2024 period we project EBITDA should go from $168Mn to $761Mn," the analyst said.
Green Thumb, which Zuanic rates at Overweight, was recently infused with some $100 million in financing from an undisclosed institutional investor.
Investment firm BlackRock, Inc. BLK is rumored to be the investor. A representative for Green Thumb would not confirm the deal took place, and a BlackRock spokesperson did not provide a statement on the matter.
"This week’s $100Mn equity raise was the first in some time (none in 2019 and 2020), a rarity in the space," Zuanic said, adding that he expects the proceeds to go toward expansion — perhaps in New York.
"We set a 12mo price target of $62," he said.
Jushi just offered up some 6.5 million shares for total gross proceeds of CA$65 million ($51 million).
"We have updated our model to reflect the C$65Mn share offering," Zuanic said.
He maintains a Neutral rating on Jushi and said net proceeds from the fundraise will be $56 million and the share count will increase by 7.5 million.
"In total, we calculate Jushi will have raised close to $175Mn in net proceeds between cal 4Q20 and 1Q21," he added. "We model net cash of $98Mn by March end."
Pennsylvania and Illinois should be the main contributors to Jushi's revenue, Zuanic said.
Jushi is expected to outperform the S&P in the year ahead, according to Cantor Fitzgerald.
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