Late last week, Canaccord raised Ayr Strategies’ (CSE: AYR.a) 12-month price target to C$60 from C$52 and reiterated their speculative buy rating on the company. This comes after a wild week in the capital markets, with cannabis companies raising nearly C$1.5 billion since the start of the new year. AYR Strategies was included in this, having raised C$157.5 million in an overnight marketed financing.
AYR Strategies currently has four analysts covering the company with a weighted 12-month price target of C$50.75. This is up from the prior average, which was C$36.50. One analyst has a strong buy rating, while another three have buy ratings.
Matt Bottomley, Canaccord’s cannabis analyst, says that AYR is now cashed up to close all pending M&A transactions and predicts that AYR will “see a meaningful bump to its historical (and already profitable) operating levels.”
The main reason for this price target raise is primarily due to Canaccord rolling forward their valuation targets as they have done with Curaleaf (upgraded to C$23.50), Cresco Labs (upgraded to C$20.50), and Trulieve (upgraded to C$75).
Bottomley says that as multiple M&A transactions are closing during the first half of 2021, they are putting less weight on their 2021 estimates and primarily focusing on 2022 estimates. He does mention however that there is considerable forecasting risk when it comes to 2022 estimates.
Bottomley also addresses the valuation and how it is very attractive compared to the basket of senior multi-state operators. AYR trades at roughly 8.1x their 2022 EV/EBITDA multiple, while the average among the seniors is 10.9x. He adds that this is on top of a “40% discount to the relative valuations of many of the leading MSOs in the space by size/scale.” Bottomley believes that AYR’s multiple will play catch up and will slowly begin to rerate on strong fundamentals and the closing of its pending M&A.
AYR is set to significantly increase its U.S. exposure with the closing of its M&A transactions. The company is currently pending close on a number of significant markets including:
- Pennsylvania, the fastest-growing medical market in the U.S.
- Arizona, adult-use sales commencing in Q2/21)
- Ohio
- New Jersey, where adult-use sales are to commence likely in the back half of this year
- Florida, where it is competing for a top-5 market position via its pending deal for Liberty Health Sciences
Bottomley calls AYR the market leader in Nevada, which has primarily been the most significant tourist market in the U.S. Finally, he expects that that Massachusetts will provide upside in 2021, where AYR will see growth due to the impact of two-plus store openings during the calendar year alongside the commencement of recreational sales, which is most likely to happen in the near term.
Information for this briefing was found via Sedar and Refinitiv. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
