Acreage Holdings’ Q4 Results Dragged Its Stock Down



Acreage Holdings (OTCMKTS:ACRGF) stock fell after its fourth-quarter earnings results. The company reported its fourth-quarter and fiscal 2019 results on Tuesday after the market closed. Since then, the stock has fallen 13.7%. The company’s revenue missed analysts’ estimates and it also reported an EBITDA loss.

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Acreage Holdings missed revenue estimates

Acreage Holdings reported 316.5% YoY (year-over-year) revenue growth to $43.6 million. Analysts expected the company to report $49.4 million in revenue. Sequentially, the revenue rose 3.2% compared to an estimate of 17.0% from the third quarter. For fiscal 2019, the company reported $155.5 million in revenue compared to an estimate of $161.6 million. However, Acreage Holdings showed double-digit YoY growth.

For the fourth quarter, Acreage Holdings reported an EBITDA loss of $15.8 million compared to the estimate of $7.2 million.  For fiscal 2019, the EBITDA loss was $44.4 million compared to an estimate of $40 million.

Future strategies

Despite the losses, the company wants to ramp up its operations. Acreage Holdings is building 10–15 new retail dispensaries. The company plans to focus on growing its wholesale business. Acreage Holdings plans to save costs by implementing general and administrative cost-saving initiatives. The initiatives could help the company realize $7 million in annualized savings. In a press release, Acreage Holdings said that it targets positive adjusted EBITDA in the second half of 2020.

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In the earnings call, the company discussed its growth drivers. First, Acreage Holdings will focus on increasing production and processing capacity and capabilities in key states. The company plans to target the states where marijuana is already legal or the chances of cannabis legalization are high including Illinois, New Jersey, New York, and Pennsylvania.

Second, the company will also focus on the national roll-out of its brands Botanist and Live Resin Project to more states. the company plans to strengthen its footprint in the states where it already exists by opening more retails stores.

Analysts’ recommendations

Currently, ten analysts cover Acreage Holdings stock after the results. Analysts’ recommendations for the stock are the same after its earnings. Among the analysts, five recommend a “buy,” three recommend a “strong-buy,” and two recommend a “hold.” The average target price on the stock is $12.6 lower than $13.2 before the earnings release. Meanwhile, the target price is 212% higher than the last closing price. Recently, a Cowen analyst stated that he prefers US cannabis companies over Canadian companies. He downgraded Aurora Cannabis (NYSE:ACB). However, he kept the “market perform” rating for Canopy Growth (NYSE:CGC)(TSE:WEED).

Acreage Holdings stock closed with a loss of 9.7% on Thursday on the OTC markets. Meanwhile, MedMen (OTCMKTS:MMNFF) closed with a loss of 14.4%. Aurora Cannabis stock and Canopy Growth stock closed with losses of 3.9% and 6.9%, respectively. In February, Acreage Holdings stock has fallen by 30.9%. So far, the stock has lost 32.2% of its stock value year-to-date.


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