What to Expect from Green Growth Brands’ Q2 Earnings?

Green Growth Brands (NYSE:GGB) will likely report its results for the second quarter of fiscal 2020 on February 24. For the quarter, analysts expect the company’s revenue to rise sequentially, while its adjusted EBITDA could also improve. Let’s look at analysts’ expectations in more detail.

Analysts’ revenue expectations for Green Growth Brands

For the second quarter, analysts expect Green Growth Brands to report revenue of $21.7 million—a rise of 70.8% from $12.7 million in the first quarter of fiscal 2020. The growth in both the MSO (multi-state operation) segment and the CBD segment could drive the company’s revenue during the quarter.

For the quarter, Green Growth Brands’ management expects to generate revenue of $10 million from the MSO segment and the CBD segment. The company’s management is focusing on promotional programs, introducing new products, and customer engagement to drive its sales. As of November 27, 2019, the company operated 193 stores compared to 139 stores at the end of the first quarter of fiscal 2020. Also, the company is working on deeper web penetration to increase its online sales. We expect the company’s wholesale business, which manufactures CBD lines for American Eagle, to grow this quarter.

Green Growth Brands’ EBITDA to improve

For the quarter, analysts expect Green Growth Brands to report a negative adjusted EBITDA of $14.8 million. The estimate is an improvement from a negative EBITDA of $15.2 million in the first quarter. The company’s management expects higher sales and gross profits and lower G&A expenses to improve its adjusted EBITDA during the quarter. However, they expect that selling and marketing expenses could rise during the quarter and offset some of the improvements. Management hopes that the company’s first-quarter initiatives could lower its head office salaries during the quarter.

Analysts’ recommendations

Analysts are bullish on Green Growth Brands before its second-quarter earnings. As of February 14, all three of the analysts that follow the stock recommend a “strong-buy” rating. On the same day, analysts’ consensus target price was 3.75 Canadian dollars, which implies a 12-month return potential of 706.5%. In January, Eight Capital lowered its target price from 5 Canadian dollars to 2 Canadian dollars.

Stock performance

As of February 14, Green Growth Brands was trading at 0.47 Canadian dollars, which implies a fall of 60.6% since it reported its first-quarter earnings on November 25. The weakness in the cannabis sector appears likely led to a fall in the company’s stock price. Meanwhile, the company’s stock has lost 41.9% of its stock value this year. Green Growth Brands has underperformed its peers and the ETFMG Alternative Harvest ETF (NYSE:MJ). Curaleaf Holdings (OTCMKTS:CURLF) has returned 2.3% YTD, while Cresco Labs (OTCMKTS:CRLBF) and Charlotte’s Web Holdings (NYSEARCA:CWEB) have fallen by 26% and 14.6%, respectively. MJ has also lost 4.0% of its stock value this year.