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Acreage: Analysts Lower Targets after Q3 Earnings

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Acreage Holdings (ACRG) (ACRGF) reported its third-quarter earnings after markets closed on November 12. In the quarter, the company’s revenue rose 26.2% sequentially to $22.4 million, and its adjusted EBITDA improved from -$15.25 million to -$12.39 million.

However, the company missed analysts’ revenue estimate of $42.2 million, and its net loss of $39.9 million was higher than analysts’ $15.0 million forecast. After the company’s lower-than-expected third-quarter performance announcement, its stock fell.

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However, investors’ euphoria over the House Judiciary Committee passing legislation to legalize cannabis at the federal level supported Acreage Holdings stock. As of November 22, the stock was trading at 5.73 Canadian dollars, 19.1% higher than when the company reported its third-quarter earnings. Let’s look at analysts’ opinions and recommendations on Acreage.

Analysts lower their price targets for Acreage Holdings

Following Acreage Holdings’ third-quarter earnings announcement, Beacon Securities and Canaccord Genuity lowered their price targets for its stock. Beacon cut its target from $27 to $17, while Canaccord cut it from $30 to $20. Analysts’ average price target for Acreage fell from $17.60 on October 22 to $13.85 on November 22. The new target implies a 141.7% return based on the stock’s November 22 price of $5.73. On the same day, peer stocks MedMen Enterprises (MMEN) (MMNFF), Curaleaf (CURA) (CURLF), and The Green Organic Dutchman (TGODF) (TGOD) were trading 302.2%, 99.8%, and 156.8% below analysts’ respective price targets.

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Analysts’ opinions on Acreage

Acreage missed analysts’ top- and bottom-line estimates. However, Russell Stanley of Beacon Securities is optimistic about the company’s future, as reported by Cantech Letter. He expects regulatory changes in California, Maine, and New Jersey to close the gap between Acreage’s pro forma revenue and its net revenue by the first quarter of fiscal 2020. Acreage expects to have 35–45 dispensaries by the end of this year. According to Cantech, Stanley stated that Acreage, along with its partners, owned 33 dispensaries as of November 15, including four dispensaries awaiting regulatory approval. Therefore, he believes Acreage’s dispensary target is reasonable.

Analysts’ ratings for Acreage

Since Acreage reported its third-quarter earnings, there has been no change in analysts’ ratings. They have stayed bullish despite its lower-than-expected third-quarter performance. Of the ten analysts covering the stock, five have rated it as “strong buy,” four suggest “buy,” and one suggests “hold.”

As shown in the above graph, Acreage’s coverage has increased in the last year. In November 2018, Acerage was covered by just one analyst, compared with ten now. Let’s look at analysts’ ratings for Acreage’s peers.

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  • For MedMen Enterprises, six of the eight analysts covering the stock suggest “hold,” one suggests “buy,” and another suggsts “sell.” For more on analysts’ opinions, read MedMen: Analysts’ Views before Its Earnings.
  • Seven of the eight analysts covering CuraLeaf have rated it as “buy.” GMP Securities projects strong growth for the stock over the next year. To learn more, read Curaleaf Stock: GMP Expects More than 200% Growth.
  • Of the analysts following The Green Organic Dutchman, two suggest “buy,” two suggest “hold,” and two suggest “sell.”

Year-to-date stock performance

As of November 22, Acreage Holdings stock had fallen 69.8% this year. In April, Canopy Growth (CGC) (WEED) announced it would be acquiring Acreage. However, the companies agreed to complete the transaction after the US legalizes cannabis federally. Delays in cannabis legalization have caused the company’s stock to fall.

Meanwhile, as of November 22, peer stocks MedMen, Curaleaf, and TGOD had returned -81.0%, 26.9%, and -61.4% this year, respectively. On November 19, Curaleaf reported impressive third-quarter earnings results, boosting its stock. For more marijuana-related news, check 420 Investor Daily.

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