Cantor Fitzgerald initiates coverage of three cannabis stocks, with Verano drawing higher rating
10:03 am ET February 10, 2023 (MarketWatch)
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By Steve Gelsi
Verano is praised for offering 'some of the highest operating cash flow metrics'
Cantor Fitzgerald initiated coverage of three cannabis businesses on Friday, with Verano Holdings Corp. drawing an overweight rating while Planet 13 Holdings Inc. and Ascend Wellness Holdings Inc. were started at neutral.
Verano offers "some of the highest operating cash flow metrics" among multistate cannabis operators (MSOs), along with Green Thumb Industries Inc. , and has one of the strongest balance sheets in the group, analyst Pablo Zuanic said.
"Yes, the entire MSO sector is generally inexpensive, but we suggest investors buy the larger and more established names, with above average financial and operational metrics," Zuanic said. "We believe Verano fits all those criteria."
Zuanic set a 12-month price target of $10 for Verano's stock, which closed below $4 a share on Thursday.
Ascend Wellness (AAWH) drew a neutral rating and a $1.75 price target for its stock, which closed Thursday at $1.35 a share.
Zuanic said some of the company's stores, such as those in Rochelle Park, N.J., and Collinsville, Ill., rank among the best-performing in the country.
"A combination of great locations and superior retail service/execution, in our view, makes Ascend stores stand out," with sales growth well above its peer group, he said.
On the downside, Zuanic sees challenges for Ascend Wellness's dispensaries in Illinois, because two of its eight stores in the state are near St. Louis, which is opening up competing adult-use stores now that Missouri has voted to legalize cannabis.
"As with most MSOs, we believe the stock is attractively valued and it should rerate if the group begins to recover," Zuanic said. "But on a standalone basis, we see better risk/reward in other MSO names."
