Down but Not Out – New Cannabis Ventures

You’re reading a copy of this week’s edition of the New Cannabis Ventures weekly newsletter, which we have been publishing since October 2015. The newsletter includes unique insight to help our readers stay ahead of the curve as well as links to the week’s most important news.

Friends,

This has been a tough year for cannabis investors so far. After a terrible week, the New Cannabis Ventures Global Cannabis Stock Index has declined 7.5% in 2023 to 8.99, its lowest close ever. This follows a historic 70.4% decline in 2022, and we are now down over 90% from the early 2021 high:

We continue to see some great values in the leading cannabis companies, but we remain cautious in the near-term. When the market took off in January, we warned that volumes were very light and that investors shouldn’t assume that the rally would continue. Near the peak, we warned in early February, when the GCSI was up 14.1% year-to-date, that we were concerned about the market, which is now 19% lower. We shared a list of YTD returns, and there were 7 names up more than 20% and 3 down more than 10%. Today, it’s very different with four double-digit gainers and fifteen double-digit decliners:

In mid-February, we described what investors want to see: stable outlooks. Last week, we discussed the massive chop from analysts for the outlook for GTI in 2023 and 2024, and the same thing happened with Trulieve this week. We suggested that the important thing to watch is cannabis analyst outlooks. This week, we get another report from one of the largest MSOs, and we hear from the other two near the end of March.

There is a lot more to cannabis stocks than just the large American operators, but the Canadian LPs and retailers and the ancillary companies are under pressure. Trading volumes remain very low.

We like cannabis stocks here for long-term investors, but we aren’t yet seeing signs of an imminent rally. Earnings season for Q4 isn’t yet over, but it hasn’t helped so far. We are optimistic that the May reports for Q1 could get what the market needs: more cannabis investors. Cannabis stocks, in our view, a buy, but it’s not yet rally time.

TerrAscend Is Expanding Its Brands Across North America

Leading North American cannabis operator TerrAscend is scheduled to report Fourth Quarter 2022 earnings on March 16th, with the conference call starting at 5pm ET. In January, New Cannabis Ventures hosted a webinar with the company’s leadership team and published a summary that dives into the company’s history, its operations in each state, branding strategy and more. Revenue for Q4 is projected to grow 41% to $69 million. For 2023, it is projected to grow 32% to $331 million, and adjusted EBITDA is forecast to increase 123% to $73 million.

Get up to speed by visiting TerrAscend’s Investor Dashboard that we maintain on their behalf as a client of New Cannabis Ventures. Click the blue Follow Company button in order to stay up to date with their progress.

New Cannabis Ventures publishes curated articles as well as exclusive news. Here is some of the most interesting business content from this week:

Exclusive

January cannabis sales fell 7% sequentially after increasing 5.3% in December, according to cannabis data analytics firm BDSA. Revenue fell sequentially in all states except for Nevada (0.4%): Florida (-3.1%), Illinois (-11.6%), Maryland (-7.3%), Massachusetts (-9.4%), Michigan (-6.5%), Pennsylvania (-3.3%), Arizona (-2.8%), California (-9.1%), Colorado (-3.3%), and Oregon (-4.8%).

In an exclusive interview, Village Farms President and CEO Michael DeGiglio said he expects the cannabis segment of the company’s business will continue to grow this year. DeGiglio is anticipating high single-digit growth in the Canadian cannabis market, and the company’s goal is to keep pace with that growth.

Earnings

AFC Gamma Q4 net interest income was $19.7 million, up 9% compared to prior quarter and up 52% year-over-year “AFC Gamma ended the year by delivering strong earnings in a difficult macro environment for cannabis and the broader market,” said Chairman and CEO Leonard M. Tannenbaum. “Our liquidity was enhanced by repayments over the course of 2022 and includes our currently undrawn revolving credit facility.” In addition, the company announced Robyn Tannenbaum will serve as President. She was previously the Company’s Managing Director, Head of Originations and Investor Relations.

Ayr Wellness Q4 revenue rose 4.2% sequentially to $124.6 million and was up 11.5% year-over-year. The company’s net revenue for the full year was up 30.2% to $465.6 million from $357.6 million in FY 2021. The company added 14 dispensaries across its eight-state footprint, bringing its total dispensary count to 80 stores. “In the past few months, our team has begun the process of evaluating every aspect of our business with fresh eyes, conducting a thorough review of our markets, our people, and our processes, all in service seeking to maximize the financial health of our company and better position Ayr as a retailer of choice and house of brands,” said President and CEO David Goubert.

Chicago Atlantic reported Q4 net interest income of approximately $14.8 million, a sequential increase of 14.1%. Net interest income for the full year was approximately $48.9 million. Meantime, Net Income was approximately $7.3 million, representing a sequential decrease of 25.7%. “With multiple large credit facilities originated during the quarter and in the first months of 2023, we believe we have also reset the pricing for senior secured direct cannabis lending. The disciplined, opportunistic capital raise in February, along with the extension and potential further expansion of our credit facility, provide for additional deployment opportunities in 2023,” said Executive Chairman John Mazarakis.

Hydrofarm Q4 net sales decreased 17% sequentially to $61.5 million, down 44% compared to prior year. “While the current operating environment remains challenging, I am encouraged that we finished 2022 with our net sales coming in at the upper end of our previously provided outlook and that we generated positive free cash flow for the third quarter in a row,” said Bill Toler, chairman and CEO. In Q4 the company initiated a restructuring to streamline operations, reduce costs and improve efficiencies. Major initiatives include reducing the company’s product and brand portfolio and relocating and consolidating certain manufacturing and distribution centers.

Trulieve reported record revenue of $1.24 billion in 2022, up 32% year-over-year. Q4 revenue remained flat sequentially at $302 million. The company said 96% of its revenue growth came from retail sales. The company opened three new dispensaries – two in Florida and one in  West Virginia – and launched adult-use sales in Connecticut. Trulieve operates 184 retail dispensaries and more than 4 million square feet of cultivation and processing capacity in the U.S. “Trulieve has grown to surpass $1.2 billion in revenue in less than seven years, a notable milestone and a testament to the agility of our team,” said CEO Kim Rivers.

Village Farms Q4 cannabis revenue declined 6% sequentially to $33.3 million, down 2% year-over-year. Despite that, CEO Michael DeGiglio said, “Our Canadian Cannabis business became the number two top-selling cannabis company nationally, growing market share sequentially every quarter during 2022.”

To get real-time updates download our free mobile app for Android or Apple devices, like our Facebook page, or follow Alan on Twitter. Share and discover industry news with like-minded people on the largest cannabis investor and entrepreneur group on LinkedIn.

Use the suite of professionally managed NCV Cannabis Stock Indices to monitor the performance of publicly-traded cannabis companies within the day or over longer time-frames. In addition to the comprehensive Global Cannabis Stock Index, we offer a family of indices to track Canadian licensed producers as well as the American Cannabis Operator Index and the Ancillary Cannabis Index.

View the Public Cannabis Company Revenue & Income Tracker, which ranks the top revenue producing cannabis stocks.

Stay on top of some of the most important communications from public companies by viewing upcoming cannabis investor earnings conference calls.

Discover upcoming new listings with the curated Cannabis Stock IPOs and New Issues Tracker.

Sincerely,

Alan & Joel

Based in Houston, Alan leverages his experience as founder of online community 420 Investor, the first and still largest due diligence platform focused on the publicly-traded stocks in the cannabis industry. With his extensive network in the cannabis community, Alan continues to find new ways to connect the industry and facilitate its sustainable growth. At New Cannabis Ventures, he is responsible for content development and strategic alliances. Before shifting his focus to the cannabis industry in early 2013, Alan, who began his career on Wall Street in 1986, worked as an independent research analyst following over two decades in research and portfolio management. A prolific writer, with over 650 articles published since 2007 at Seeking Alpha, where he has 70,000 followers, Alan is a frequent speaker at industry conferences and a frequent source to the media, including the NY Times, the Wall Street Journal, Fox Business, and Bloomberg TV. Contact Alan: Twitter | Facebook | LinkedIn | Email