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.  As it is, we are likely to be seeing movement on the Senate version of cannabis federal legalization before August 6th, and that may bring in some exciting investing activity into the sector.

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 and Federal Legalization

As I have been mentioning, and continually update, I am foreseeing some movement in cannabis federal legalization just prior to the August 6th recess of congress with the dropping of the Senate version of whatever cannabis federal legalization may occur.

We have been told by Senator Schumer that whatever version they are going to produce it will be introduced prior to this break.  Then, there is the gap after this break in September & October where the vote will likely occur.  Finally, reconciliation will happen after that with the House version.

I expect a final vote in late October.  This may start pushing AAWH stock as well as all other cannabis stocks, all through late October, into November, December, and maybe as far as into January.

However, I expect this to be short-lived.  I have mentioned this several times.  Take the money and run.  Then, get back in to your long term dream portfolio and hold on as these unencumbered companies then begin to up-list to Nasdaq.

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.

YouTube player

Ascend Wellness AAWH Stock Forecast

Ascend Wellness AAWH Stock Chart

There are some 169M shares outstanding of AAWH stock.  Given that, looking at the potential of some 35% in EBTIDA profits, this should translate into a minimum of ~7.50% net earnings.  That is approximately $0.36 EPS.  But, I also see the potential for this to be slightly higher; maybe about $0.27 EPS.

Keep in mind that future revenues are moving higher at 200% YoY for 2022.  The S&P 500 increases approximately 3.5% annually.  Ascend Wellness will eclipse this massively.  And, I really do not see any future earnings being priced into this stock whatsoever at this time.

Visit the Ascend Wellness AAWH Stock Forum

Find out what others have to say about Ascend Wellness AAWH stock in the Ascend Wellness AAWH Stock Forum:

Ascend Wellness AAWH Stock Forum & Discussion
Ascend Wellness AAWH Stock Forum & Discussion

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

Revenues have declined for Ascend Wellness. This is mostly due to normalization of revenue.  COVID saw a surge in demand from cannabis consumers as they were locked down.  Now, bars and other venues are open and cannabis demand is waning somewhat.  Organically, this moderation in cannabis sales will factor out and eventually turn upward on a gradual basis.

But, simultaneously, Ascend Wellness is bringing in 15 more dispensaries in a very short period of time.  Since there are some 20 dispensaries now, this will mean an approximate 50% – 75% increase in revenue.

Look for big jumps in revenue this year and next as there are more and more of the dispensaries come on line and these dispensaries start creating new and organic revenue.  That is where the real power to the future of Ascend Wellness will be and, this will be the catalyst for AAWH stock.

Ascend Wellness Operating Profits

  • Ascend Wellness Operating Profits

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 past 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

For now, total equity remains muted.  But, that all changes with the future dispensary count increasing as muchas it is.  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.

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 Forecast & Analysis

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

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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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