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Will Acreage Holdings’ Q4 Results Help Its Stock?


Feb. 25 2020, Published 10:33 a.m. ET

Acreage Holdings (OTCMKTS:ACRGF) will report its fourth-quarter and fiscal 2019 results today after the market closes. Notably, Acreage Holdings is one of the vertically integrated cannabis operators in the US. The company has a strong presence in the US. Overall, analysts expect Acreage Holdings to report good revenue growth in the fourth quarter.

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Analyst expect revenue growth for Acreage Holdings

For the fourth quarter, analysts expect Acreage Holdings to report 372.1% YoY (year-over-year) revenue growth to $49.4 million. Sequentially, the revenue could rise by 17.0% from the third quarter. For fiscal 2019, the company could report $161.6 million in revenue.

For the fourth quarter, Acreage Holdings could report an EBITDA loss of $7.2 million. Sequentially, the loss is lower than $12.3 million in the third quarter and $15.2 million in the second quarter. For fiscal 2019, the EBITDA loss could be around $40 million. Meanwhile, the gross profit margin could be around 44.5% in the fourth quarter and 45.7% for fiscal 2019.

Recently, Acreage Holdings announced some comprehensive financing transactions. Kevin Murphy, the company’s chairman and CEO, said, “In a time of limited capital availability for our industry, I am excited to announce these proposed transactions to strengthen our balance sheet, further enabling us to execute our plan to be a leading consumer cannabis company in the U.S.  In the course of these transactions, we have cemented a relationship with a well-capitalized institutional lender that has the capacity to provide additional credit facilities as necessary.”

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MedMen (OTCMKTS:MMNFF) will report its results for the second quarter of fiscal 2020 on Wednesday. Analysts expect the company to show 67.6% YoY (year-over-year) revenue growth to 50.1 million Canadian dollars. However, the company could report an EBITDA loss of 19.6 million Canadian dollars in the second quarter. Read Will MedMen Deliver Any Good News in Its Q2 Earnings? to learn more.

Cannabis legalization will benefit US cannabis companies

Canadian companies struggled with revenue and profitability growth in recent quarters. Will US cannabis companies show growth? Aurora Cannabis (NYSE:ACB) is struggling with financial difficulties. However, Canopy Growth (NYSE:CGC)(TSE:WEED) seems to be in a better place due to the investment from Constellation Brands.

For US cannabis companies, there’s a lack of financial support from banks. Notably, marijuana still isn’t legal at the federal level. Banks are concerned about supporting marijuana companies due to federal prohibition. Many smaller cannabis companies have shut down their businesses and filed for bankruptcy. Also, US cannabis companies seek bankruptcy protection from Canada due to federal protection. Federal marijuana legalization could help US cannabis companies obtain financial aid. Legalization is picking up steam again in the US. Democratic presidential candidates like Pete Buttigieg, Elizabeth Warren, and Bernie Sanders support marijuana legalization. Meanwhile, legalization is also the deciding factor for the deal between Acreage Holdings and Canopy Growth.

Analysts’ recommendations

Currently, ten analysts cover Acreage Holdings stock. Among the analysts, five recommend a “buy,” three recommend a “strong-buy,” and two recommend a “hold.” Currently, the average target price on the stock is $13.2, which is 189% higher than the last closing price.

Acreage Holdings stock closed 8.2% lower on Monday on the OTC markets. Meanwhile, MedMen (OTCMKTS:MMNFF) closed with a loss of 3.1% yesterday. Aurora Cannabis stock and Canopy Growth stock closed with a loss of 7.1% and 7.2%, respectively. Acreage Holdings stock has fallen by 20.6%. So far, the stock has lost 22.1% of its stock value year-to-date. Will the company’s fourth-quarter results help revive the stock?


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