Acreage Holdings (ACRGF) is a US-based cannabis company with licenses to operate and provide consulting services in the US. The stock has fallen drastically this year due to headwinds. Acreage Holdings reported its second-quarter results on August 14. Since then, the stock has fallen 27.8%. Let’s take a look at analysts’ target price and ratings.
What are analysts saying?
Notably, after Acreage Holdings reported its earnings, Compass Point reduced its target price to $18 from $27. Also, Eight Capital cut its target price to $23 from $34. Cormark Securities cut its target price to $16 from $31.
Recently, Cowen and Company analyst Vivien Azer initiated coverage on Acreage Holdings and four other cannabis stocks. She gave Acreage Holdings a “market perform” rating with a target price of $9, which represents an upside potential of 11.2% from the closing price on September 27.
Analyst’s views on the stock tell us about the company’s outlook. The lower target price might be due to the company’s net loss of $17 million in the second quarter. Acreage Holdings also reported a negative EBITDA of $12 million. A negative EBITDA implies that a company’s operating costs are higher than its profit margin.
Acreage Holdings’ latest price update
The number of analysts covering Acreage Holdings stock has increased from before the results. The consensus target price for the stock fell to $18.8 from $30.5 before its earnings. The target price fell 38.3%. The company’s current revised target price means a potential upside of 132% over the next 12 months.
Meanwhile, Aurora Cannabis (ACB) has a target price of 10.1 Canadian dollars, which is 118% higher than its current price. Aphria (APHA) has a target price of 14.9 Canadian dollars, which is 172% higher than its current price. Cronos Group (CRON) has a target price of 19.0 Canadian dollars, which is 107% higher than its current trading price.
Acreage Holdings’ stock performance
Acreage Holdings stock has fallen 57% year-to-date. The stock has fallen approximately 28% since it reported its second-quarter earnings. The stock has risen 11.1% in September. Meanwhile, Canopy Growth has risen 1.0%, Aphria has fallen 12.6%, and Cronos Group has fallen 16.9% in September.
Tracking the trend
Over the past 12 months, Acreage Holdings stock received increased coverage from analysts due to its improved fundamentals. The company has seen a drastic increase in its revenue growth over the past 12 months.
Analysts might have been interested in Acreage Holdings’ merger with Canopy Growth (CGC) (WEED). Canopy Growth has a strong financial footing due to Constellation Brands’ (STZ) huge investment in it. A merger with a big cannabis player like Canopy Growth definitely makes Acreage Holdings an interesting stock. However, the merger depends on the federal decision on marijuana legalization in the US.
Notably, the number of analysts covering the stock increased from two to ten during this period. Analysts’ “buy” recommendations also increased on the stock. However, Acreage Holdings’ target price fell gradually during this period.
While Acreage Holdings’ consensus target price fell after its earnings, most of the analysts are still bullish on the stock. The overall “strong-buy” rating didn’t change from the period before the company’s earnings release.
Currently, among the ten analysts covering the stock, four recommend a “strong-buy” and five recommend a “buy”—up from three before the company’s earnings release. One analyst recommends a “hold” rating on the stock—up from no analysts before the company’s earnings release.
Aurora Cannabis has a majority “hold” rating on its stock. Aphria has a majority “buy” rating, while Cronos Group has a majority “hold” rating on its stock.
What’s happening in the cannabis industry?
Notably, the House of Representatives passed the SAFE Banking Act on September 26. The banking bill allows cannabis businesses to get financial support and expand their business. To learn more, read Marijuana Legalization: House Passes SAFE Act in US.
Kevin Murphy, Acreage Holdings’ chairman and CEO, said, “The bill, which would deliver access to traditional banking services for the over 10,000 legal cannabis businesses in the U.S., promotes the safety, transparency, and certainty that the cannabis industry, the fastest-growing sector of the U.S. economy, needs to prosper.”
Canada will hit its second phase of cannabis legalization in October, which puts more pressure on the US.
Read Which Cannabis Stocks Have Lost More than 40% in 2019? to learn more.