Ascend Wellness Holdings Inc: 6 States, 20 Dispensaries, & Still Growing
Cannabis stocks are in a bear market, with stalled federal U.S. legalization of marijuana being the biggest industry headwind. That’s despite an overwhelming 68% of Americans supporting legalization.
Other hurdles that are keeping pot stocks in the dumps include soaring inflation, tight capital, supply chain issues, and a looming recession.
This uncertainty is plaguing the entire cannabis industry. ETFMG Alternative Harvest ETF (NYSEARCA:MJ), which is the world’s largest marijuana exchange-traded fund (ETF), is down by 25% in 2022 and 60% year-over-year. AdvisorShares Pure US Cannabis ETF (NYSEARCA:MSOS) is down by 40% this year and 65% year-over-year.
Suffice it to say, it’s difficult to find a pot stock performing well right now. Many U.S. cannabis companies have been reporting solid financial results; their stock prices just need to catch up.
One undervalued marijuana stock with tremendous long-term growth potential is Ascend Wellness Holdings Inc (CNSX:AAWH.U, OTCMKTS:AAWH). In 2021, the company reported record sales and pursued an aggressive expansion plan.
In 2022, Ascend Wellness Holdings Inc is working to optimize its asset base, improve its market position, and take advantage of the legal recreational pot market in New Jersey, which launched on April 21.
Despite all this, AAWH stock has been taking a beating. Currently trading around $3.16, Ascend Wellness stock is down by:
- 22% over the last month
- 27% over the last three months
- 52% year-to-date
Pretty abysmal, but the performance of AAWH stock really has nothing to do with the business performance of Ascend Wellness Holdings Inc.
Even with all the headwinds, Wall Street analysts are increasingly bullish on Ascend Wellness stock. Of the analysts providing a 12-month price target for AAWH stock, their average estimate is $8.87 and their high estimate is $12.00. This points to potential upside between 180% and 280% for Ascend Wellness stock.
Chart courtesy of StockCharts.com
About AAWH Stock
Ascend Wellness Holdings Inc is a vertically integrated cannabis company that owns and operates state-of-the-art cultivation facilities, grows award-winning strains, and produces a curated selection of products.
It operates 20 dispensaries in Illinois, Massachusetts, Michigan, New Jersey, Ohio, and Pennsylvania. (Source: “Investors Roadshow Presentation April 2022,” Ascend Wellness Holdings Inc, last accessed May 4, 2022.)
Through its five cultivation facilities, Ascend Wellness Holdings also operates 213,000 square feet of canopy and expects that figure to grow to 255,000 square feet by the end of 2022.
In 2021, Ascend Wellness Holdings Inc:
- Added 100,000 square feet of canopy, more than doubling its cultivation capacity
- Entered the Ohio market and completed three acquisitions
- Opened six new dispensaries and acquired two new dispensaries, bringing its total store count to 20
- Launched a delivery program in Massachusetts and Michigan
- Announced exclusive partnerships with Lowell Smokes and Edie Parker
(Source: “AWH Announces Fourth Quarter and Full Year 2021 Financial Results,” Ascend Wellness Holdings Inc, March 8, 2022.)
The company has a strong pipeline of assets that will be launched in 2022 and 2023. This includes new dispensaries, expanded cultivation facilities, and new products.
So far in 2022, Ascend Wellness Holdings has started recreational marijuana operations in New Jersey, launched “Simply Herb” (a value cannabis brand), and expanded its dispensary and cultivation footprint in Illinois.
On top of that, Ascend Wellness Holdings Inc is looking to expand into other populous, limited-license recreational or near-recreational marijuana markets, including Arizona, Connecticut, Maryland, Pennsylvania, and Virginia.
Great 2021 Q4 & Full-Year Results
For the fourth quarter ended December 31, Ascend Wellness Holdings Inc announced that its gross revenue increased by 71% year-over-year but slipped by 2.9% sequentially to $102.0 million. (Source: Ibid.)
The company’s fourth-quarter net revenue (which excludes intercompany sales of wholesale products) increased by 63% year-over-year to $88.5 million. Ascend Wellness Holdings Inc reported a fourth-quarter 2021 net loss of $16.5 million, or $0.10 per share, compared to a fourth-quarter 2020 net loss of $7.5 million, or $0.07 per share.
The company’s fourth-quarter 2021 adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) went up by 82.8% year-over-year to $19.8 million.
Ascend Wellness Holdings Inc’s full-year 2021 gross revenue increased by 135.8% year-over-year to a record $380.4 million. Its full-year net income went up by 131.3% to $332.4 million. The company’s full-year net loss came in at $122.7 million, or $0.82 per share, compared to a 2020 net loss of $25.4 million, or $0.27 per share.
The big year-over-year increase in full-year net loss was fueled by a $32.0-million non-cash interest expense related to Ascend Wellness stock’s initial public offering (IPO), which was completed in May 2021.
The increase in Ascend Wellness Holdings Inc’s net loss was further exacerbated by interest expenses related to one-time prepayments of legacy loans, write-offs of unamortized deferred financing costs, and $41.7 million worth of tax expenses, compared to tax expenses of $18.7 million in the prior year.
Ascend Wellness Holdings Inc’s full-year 2021 adjusted EBITDA went up by 157% to $79.4 million.
Also in 2021, the company strengthened its balance sheet with $210.0 million of senior debt financing. The company ended the year with cash and cash equivalents of $155.5 million.
Ascend Wellness Holdings Inc is a fabulous pot company that has seen its share price take a hit due to broader industry malaise. It’s just a matter of time, however, before Washington does what American voters want it to do and federally legalize marijuana.
Until then, Ascend Wellness Holdings will continue to do what it does best: grow and sell award-winning products from its rising number of dispensaries. As such, investors might want to keep an eye on AAWH stock.