Cannabis MSO Earnings Analysis

<p>Analyst are expecting revenues for the large MSOs to continue to decline, causing a sharp reduction in their EBITDA estimates for Curaleaf (CSE: CURA) and TerrAscend (CSE: TER) and moderate decreases for AYR (CSE: AYR.A), Cresco (CSE: CL), and Jushi (CSE: JUSHF). Estimates for Columbia Care (CSE: CCHW) and GTI (CSE: GTII) are virtually unchanged, and Verano and Trulieve estimates are higher.</p><p>Earnings revisions have had little impact on relative performance. Curaleaf, with the most significant downward revisions, actually outperformed Trulieve with the most significant upward revisions.</p><p>M&A activity had a significant impact on some of these revisions. Trulieve and Verano completed $1.5B  and $630M, respectively, in acquisitions over the period. But even some major acquirers had their EBITDA revised downward sharply. For example, AYR completed $1.0B in acquisitions, and analysts have revised their 2022 EBITDA projections downward by 8%.</p><p>The missing link is margins.</p><p>All the companies, except for Curaleaf and TerrAscend, have higher 2022 revenue projections than they did a year ago. Still, every company except Verano (data not available) has lower EBITDA margin estimates for 2022 than they did a year ago. These lower margins more than offset higher projected revenues.</p><p>What happened to margin expectations? </p><p>Our guess is that the sell-side equity analysts were just a bit too optimistic and have been forced to rein in their expectations.</p><p>Episode 902 The #TalkingHedge looks at Viridian Capital Advisors’ report...</p><p><a href="https://youtu.be/uR5WSUQ-YGA">https://youtu.be/uR5WSUQ-YGA</a></p>