Most of the largest U.S. marijuana multistate operators experienced revenue declines in the first quarter of 2022 versus the previous three months, reflecting seasonal factors, declining cannabis prices and inflationary pressures that could be curbing consumer spending.
Of the 12 largest MSOs, only Illinois-based Green Thumb Industries posted a net profit for the first three months of 2022.
Florida-headquartered Trulieve Cannabis, meanwhile, inched ahead of Curaleaf Holdings for the top spot in revenue.
But, based on revenue guidance, Massachusetts-based Curaleaf likely will reclaim the top position, perhaps as soon as second-quarter results are announced.
In a metric closely watched by investment analysts, half of the 16 largest marijuana MSOs beat EBITDA (earnings before interest, tax, depreciation and amortization) estimates, while half missed their projections – about what one would expect in a given quarter, according to Frank Colombo, director of data analytics at New York-based Viridian Capital Advisors.
“What is striking is how little correlation there is between missing EBITDA estimates and how the stock did,” Colombo told MJBizDaily via email.
In fact, the company that outperformed EBITDA estimates the most on a percentage basis – Nevada-based Planet 13 Holdings – had the worst relative stock performance, according to Viridian.
“Meanwhile, the company that missed estimates by the most was TerrAscend (with offices in New York and Toronto), but the stock slightly outperformed the market,” Colombo wrote.
“Our conclusion is basically that investors shrugged off the quarter’s numbers.”
Marijuana stock prices have been battered in the past 18 months, largely because of the lack of progress by Congress in reforming the nation’s marijuana laws.
Colombo wrote that cannabis stock investors also are now considering the following factors:
- How well is a company positioned to take advantage of the emerging recreational marijuana markets in New Jersey and New York?
- Is a company a potential takeover candidate?
- How is the company’s liquidity situation? Will it need to raise money in what has become an unfavorable economic market to do so?
In addition, Colombo wrote, “it will be interesting to see if inflation and/or a weakening economy start to have an impact on margins.”
A new No. 1
Trulieve Cannabis captured the top spot in revenue on the strength of a 4% quarter-over-quarter increase, while Curaleaf’s revenues slipped 2% for the same period.
MSOs typically enjoy a strong bump in sales during the December holiday period, followed by weaker sales after the first of the year.
In 2022, marijuana companies also are facing such revenue-squeezing factors as declining prices.
Yet, the larger economy is experiencing inflation that affects the amount of money consumers have to spend on discretionary products such as cannabis.
Trulieve is the market leader in Florida’s billion-dollar-plus medical marijuana industry and has market-leading retail positions in Arizona and Pennsylvania, according to company regulatory filings.
But Trulieve doesn’t have a presence at this point in New York or New Jersey and is seeing more competition in Florida, where it once commanded roughly half the market share.
Trulieve still has nearly 50% of retail flower sales in Florida, according to the state’s May 27 weekly update, but its share of sales of other THC products has fallen to roughly 40%.
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By Jeff Smith, Legal & Regulatory Reporter
June 1, 2022
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Source : MJBiz Daily Research
Link to original study: Marijuana multistate operators see sluggish revenue, losses in first quarter
