Ascend Wellness AAWH Stock Forecast & Analysis

Ascend Wellness AAWH stock is a cannabis stock I think has a lot of potential that is under-appreciated.  However, this under-appreciation for cannabis stocks is the same across the board regardless of which cannabis stock you are viewing.  I wanted to update the AAWH stock forecast and get my thoughts out there for Ascend Wellness in the future.  We are starting to see a lot of movement with cannabis stocks and likely there is going to be some form of cannabis federal legalization very soon.

In the meantime, for now Ascend Wellness is continually building up its portfolio of assets to include concluding the settlement with MedMen and, they will incorporate the four dispensaries moving forward.  There are currently 20 total dispensaries in their portfolio.  They should have about 35 very soon as they continue build-outs, acquire dispensaries, and plan more.  This is a nearly doubling of dispensary count for Ascend Wellness, and AAWH will see long term growth from this over the years.

Licensing deals

There are several other things that I like about Ascend Wellness that catch my eye.  They have a strategic partnership with Lowell Farms. Lowell Farms is licensing its products to Ascend Wellness.  And, Trulieve is involved in a licensing deal… I wonder if a licensing deal with Trulieve & Lowell could occur on a large-scale basis?  But, being able to license & distribute a well-acclaimed product such as Lowell will have the added benefit of continually drawing in customers in search of great products at Ascend Wellness dispensaries.  So, I expect continued increases in revenues from that.

Ascend Wellness: New York & New Jersey

Ascend Wellness is focusing on the upper northeast corner of the United States.  New York & New Jersey are slated to become very important contributors to both top line and bottom line for Ascend Wellness.

If you had a chance to listen in on the latest financial release press conference one of the things mentioned was the future size of cannabis and its potential throughout the United States.

First, and as pointed out by management, legal cannabis sales in the United States now exceed revenue by Starbucks.  That is an extraordinary statistic.  And, legal sales of cannabis are only set to increase from here as more and more states flip to cannabis legal in some form or another.

Ascend Wellness will do well in this hyper-growth environment as they are focused on states with dense populations and are flipping to adult-use legal.  The opening in New Jersey saw high demand for Ascend Wellness at its locations without backlog like other dispensaries.

AAWH Stock

I put together a video to start the process of analyzing Ascend Wellness.  This is a company I will keep a sharp eye on because I think Ascend Wellness has a tremendous amount of upside potential.

Ascend Wellness Financial Data

Here is a breakdown of latest Ascend Wellness financial data.  I will continually update the financial data and the AAWH stock forecast as new information comes in.

Ascend Wellness Gross Profits

  • Ascend Wellness Revenue

New Jersey has added some juice to revenues for Ascend Wellness after a small drop from the previous quarter.  Nearly all cannabis companies saw revenue drops in the first quarter of 2022 after record numbers in Q4, 2021.  This has caught the attention in a lot of media casting a tone over investing during the H1 of this year.  Nonetheless, Ascend’s moves into New Jersey are welcome news for investors.  Remember, this is a process, not an event.  Ascend’s continued growth will come from more and more dispensaries and offerings in these dispensaries.

On the economic front, the US economy is very likely to contract significantly.  While revenue is at its peak now in Q2, my expectation is that we are very likely to see further declines in revenues.  This may be balanced with Ascend Wellness because they are simultaneously opening new dispensaries while increasing or gain revenue.  If the two can measure things out and continue to build up revenue increases through customer attainment and retention, despite the economic outlook, this will be a boon for the future.  The economic situation is going to be for a smaller period of time and eventually, turn a corner back upward.

Ascend Wellness Operating Profits

  • Ascend Wellness Operating Costs

At this point, Ascend Wellness is competitive with operating efficiencies when you compare these to the rest of the industry.  At this stage, most of the best players in the cannabis industry are printing roughly 30% – 35% in operating efficiencies.  Keep in mind that this is a ratio based upon cost.

If cost remain relative static, but revenues continually climb, this ratio improves (Since it is a ratio based upon cost, you want the smallest number possible).  Given this, the S&P 500 prints about 17.5% operating efficiencies.

Do the math on this: Ascend Wellness is about to open approximately 15 new stores on top of the 20 they already have.  While there will be increases in operating costs, SG&A, this should remain fairly static compared to the growth in revenue.

These kinds of things are usually lost until someone actually looks deeply into what any one company is doing.  To me, this is an opportunity that the market is not appreciating and, this is a reason that AAWH stock will eventually slingshot higher because of future earnings.

Ascend Wellness EBTIDA & Net Profits

  • Ascend Wellness EBITDA

The previous two quarters Ascend Wellness has posted drops in EBITDA as well as EBITDA/revenue levels.  But, this is going to turn upward once again.  First, with some 15 new dispensaries coming on line shortly, there will be increases in revenue.  But, operating costs are likely remain contained as Ascend Wellness has built themselves a substantial infrastructure on a corporate level.  That will mean that as a ratio, operating efficiencies are going to improve.

As mentioned, gross margins will also improve.  With far more product moving through the system, and then selling these products into more dispensaries, Ascend Wellness will create improved economies of scale.

I expect future numbers will print better and better EBITDA levels with the eventuality that Ascend Wellness will hit net earnings profitability; thus, driving AAWH stock upward.

Ascend Wellness Cash On Hand

  • Ascend Wellness Cash on Hand

The latest deals are being financed and, simultaneously, Ascend Wellness did some refinancing and other term financing deals to keep the ball moving forward.  There will be plenty of access to capital.  But, I am hopeful for a sharp turnaround in EBITDA/Revenue and whatever losses there are they become curtailed.  It is one thing to build a big foundation and grab as much as you can.  But, cash burn is a problem and, if you are looking to build a company for the long term, you need to be able to balance cash, access to capital, and limiting cash burn.

Ascend Wellness Total Equity

  • Ascend Wellness Total Assets

Total equity is trending back upward.  All the changes with the future dispensary count increasing as much as it is will push equity higher.  This appears to be lost on investors as AAWH stock languishes where it is.  I am looking for an increase of some 50% – 75% in total equity in the next 6, 12, or 18 months.

Total equity is the future of a company.  With equity, a company can generate revenue and, by extension, profits.  With so many dispensaries planned and coming on line, and even being built or acquired at this time, the foundation is expanding rapidly.  This is entirely unrealized by the stock market.

At the same time, with cannabis federal legalization potential occurring in what might be about 4 months, looking at the stock price at this level may be the investing opportunity of a lifetime.  AAWH will have significant upside potential given this.

Ascend Wellness AAWH Stock Forecast

Ascend Wellness AAWH Stock DCF

For the AAWH stock forecast, I am incorporating the fact that this is a company that very likely will be popular versus some of the smaller companies.  I am projecting that Ascend does hit the $410M revenue this year that is projected.  But, during this time, costs will remain constraining.  That makes sense that as a company launches a new dispensary, despite there being a line at the door on opening day, it takes to get to scale up to a point where economies of scale would mean each individual dispensary is profitable.

With the new areas of development, there is plenty of upside potential for margin improvements.  For instance, and as I mentioned, operating efficiencies have room for improvement.  And, as Ascend Wellness will grow into its future self.

With a near-doubling of dispensary count, and the potential for operating costs to remain contained, the dispensaries are likely to contribute some 70% increase in revenue.  This will improve metrics across the board.  Then, if Ascend Wellness were to leverage their size at that point, they can then double dispensary counts again and increase economies of scale even further.

I brought this into the equation when I put together the AAWH stock forecast, thinking ahead into the future with metrics.

I will continue to update the AAWH stock forecast in the coming quarters as new dispensaries are brought into the fold and as financial data changes.

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Is AAWH Stock A Good Investment?

Ascend Wellness AAWH Stock Chart

From a fundamental perspective, AAWH stock is a cannabis stock to buy now.  I believe that fundamentals are going to become the driving force of pot stocks very soon.  For now, outside influences are suppressing pot stocks.  This will very likely change.

There are two things that I believe are going to drive cannabis stocks for 2022.  First, cannabis federal legalization is set for 2022.  This is a game-changer for cannabis investing.  With cannabis federal legalization, opening the door for investors in other countries to start acquiring US MSO stocks.  There could very easily be a rush into cannabis stocks.

Then, the other potential game-changer is Cannabis Cures COVID.  This is such a seismic game-changer for cannabis investing.  The evidence is already in and, there is also the new announcement that the government of Colombia via Flora Growth has received an application for approval of a cannabis product that cures & prevents COVID.  Ummm… that will take the industry parabolic.

So, I see tremendous opportunities for the cannabis industry in general.  Then, there is the fact that from an earnings perspective, Ascend Wellness has significant upside while at the same time, this is not priced into AAWH stock.  Simply put, this is a stock that will see upside of some 400% – 500%.

I am seriously considering Ascend Wellness AAWH as a the next Top Pick.

Ascend Wellness Financial Data

Ascend Wellness AAWH Stock Financial Data

7 thoughts on “Ascend Wellness AAWH Stock Forecast & Analysis

  1. Another excellent writeup DH. AAWH is my 4th largest holding behind VRNOF,AYRWF, and TRSSF. You might notice the common thread of strong holdings in my home state of NJ. I believe NJ will be the key growth engine over the next few years for AAWH and since it is MUCH smaller then my other 3 top holdings, the NJ effect will be magnified. Trading at 1x 22 revs, a very cheap EV/EBITDA. God a great deal to gain entrance into NY which will be the next huge growth engine after NJ. IL and Ma. will continue to be key producers ongoing as well.

    1. The market is not paying attention to these numbers at all. While the drop in share price is painful for all those who got in earlier, when these stocks are realized for what they will be, the upside will far outpace an investment in the broader market over the same period of time. Trust the process.

      1. Probably is a great bargain. But, I am just sitting down to write an article on Stagflation and the broader markets. We may be in for an overall bumpy ride in the near term. The Dow is down about 800 last I checked. Still, the yields will play out over a longer period of time. If you can shrug the bumps, and look long into the future, you will do well overall.

  2. Abner Kurtin  CEO,Chairman and Founder is buying shares and taking all his 2022 compensation in shares seems to have some Faith putting his money where his mouth is IMHO 
     
    AWH Announces Share Purchase by AGP, an Entity Owned by AWH Chief Executive Officer, Chairman, and Founder, Abner Kurtin and President and Co-Founder, Frank Perullo
    BY PR Newswire— 4:05 PM ET 07/05/2022
     

    NEW YORK, July 5, 2022 /PRNewswire/ – Ascend Wellness Holdings, Inc (AAWH) (“AWH”, “Ascend”, or the “Company”) (CSE: AAWH.U) , a multi-state, vertically integrated cannabis operator, announced that on July 1st AGP Partners, LLC (“AGP”), purchased 50,000 of Class A Common Shares in the open market for $2.05 per share followed by the purchase of 1,100 Class A Common shares for $1.90 per share on July 4th. AGP is an entity through which Abner Kurtin and Frank Perullo invest in Ascend.  

    Earlier this year, Abner Kurtin also elected to take all of his 2022 compensation, with the exception of certain healthcare and other benefits, as common stock in AWH.
    “We are extremely confident in the trajectory of AWH,” said Abner Kurtin, Chief Executive Officer, Chairman, and Founder of Ascend. “We are using this market dislocation as an opportunity to make an additional purchase of stock. The lack of capital in the sector remains a hindrance, but we believe that this is a temporary burden that will ultimately translate into more justified valuations. In the meantime, we are focused on executing our exciting growth initiatives while delivering strong financial performance.”

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