Ayr Wellness Stock: Unjustly Beaten-Down Pot Stock Has 570% Upside

Ayr Wellness Stock: Unjustly Beaten-Down Pot Stock Has 570% Upside

AYRWF Stock’s Downtrend Doesn’t Match Company’s Developments

The majority of Americans want recreational cannabis to be federally legal, but politicians in Washington have been dragging their feet on the issue. That apathy has been sending marijuana stocks considerably lower. Macroeconomic headwinds haven’t been helping, either.

One pot stock that hasn’t escaped the sell-off but which has excellent long-term potential is AYR Wellness Inc (CNSX:AYR.A, OTCMKTS:AYRWF).

The U.S. seed-to-sale multistate cannabis company operates 77 dispensaries in eight states: Arizona, Florida, Illinois, Massachusetts, Nevada, New Jersey, Ohio, and Pennsylvania. (Source: “Investor Presentation August 2022,” Ayr Wellness Inc, last accessed October 3, 2022.)

Since 2019, the company has expanded its operations from two to eight states, completed numerous facility projects and upgrades, launched hundreds of products, and opened dozens of new retail locations. Ayr Wellness Inc expects to have more than 84 dispensaries by the end of 2022.

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The company’s 18 cultivation and production facilities cover 1.2 million square feet and have 170,000 pounds of biomass capacity. That will expand to more than 250,000 pounds by the end of the year. Ayr Wellness Inc recently announced that one of its partners had been awarded a provisional cultivation license for Connecticut.

The company has 11 national cannabis product brands and a proprietary library of more than 130 new strains. Its products are sold at its own dispensaries and at more than 570 other licensed dispensaries around the country.

In the second quarter of this year, Ayr Wellness Inc launched 50 new products in seven markets, expanded three of its dispensaries in New Jersey, opened two dispensaries in Greater Boston, and activated new e-commerce sites in four markets.

The company reported double-digit year-over-year revenue growth for the second quarter and has a solid cash balance. Management expects the company’s financial growth to accelerate over the coming quarters.

Despite all the good things going on at Ayr Wellness Inc, its share price, like the broader marijuana stock market, has been taking a big hit. As of this writing, AYRWF stock is down by:

  • 20% over the last month
  • 35% over the last three months
  • 72% over the last six months
  • 78% year-to-date
  • 85% year-over-year

You can’t sugarcoat those numbers; it’s been an abysmal year for AYR Wellness stock.

Despite that, conservative Wall Street is extremely bullish on AYR Wellness stock. Analysts have an average 12-month share-price target of $12.26 and a high estimate of $22.63. This points to potential gains in the range of about 265% to 571%.

Chart courtesy of StockCharts.com

Q2 Revenue Up 21% Year-Over-Year; Gross Profit Up 80%

For the second quarter ended June 30, Ayr Wellness announced that its revenue increased by 20.6% year-over-year but slipped by one percent sequentially to $110.0 million. (Source: “Ayr Wellness Reports Second Quarter 2022 Results,” Ayr Wellness Inc, August 18, 2022.)

The company reported a second-quarter 2022 net loss of $38.3 million, or $0.56 per share, compared to a second-quarter 2021 net loss of $20.7 million, or $0.36 per share.

Ayr Wellness Inc’s gross profit in the second quarter went up by 80.6% year-over-year but fell by 11.5% sequentially to $40.3 million. Its adjusted gross profit went up by 7.7% year-over-year but down 1.2% sequentially to $57.2 million.

The company closed $81.5 million of real estate financing transactions during the second quarter, bringing its year-to-date total to $108.0 million. It ended the quarter with a cash balance of $116.7 million.

Jonathan Sandelman, AYR Wellness Inc’s founder and CEO, said, “Over the past few months, we have achieved many of the key transformational milestones to operationalize Ayr’s core footprint, and we are now moving to optimize this footprint for substantial growth.” (Source: Ibid.)

He continued, “We’re doing this in the face of macro headwinds from the broader economy, but it’s never been clearer that cannabis is a consumer staple that is here to stay.”

For the third quarter of 2022, Ayr Wellness Inc expects its revenue, operating income, and adjusted earnings before income, taxes, depreciation, and amortization (EBITDA) to grow by approximately 10% sequentially.

Analyst Take

AYR Wellness Inc is a great multistate, seed-to-sale cannabis company with tremendous long-term growth potential. Despite the fact that AYR Wellness Inc has made a huge transformation over the last three years, AYRWF stock has been trading at record lows. These lows aren’t sustainable, however.

The vast majority of the company’s capital expenditures are in the past. With a $117.0-million cash position, AYR Wellness Inc is well positioned to weather the current economic environment and come out stronger when things turn around.