Confidence Amidst Market Upswing
The first week of 2024 witnessed substantial stock price appreciation for the majority of the 30 stocks ranked weekly by Viridian Capital Advisors. Notably, the MSOS ETV surged by 12.84%, marking the sharpest uptick since the HHS announcement at the end of August. Surprisingly, the surge was not catalyzed by any specific news—just a market eager to believe following confirmation from the DEA that they are studying the issue of rescheduling.
Despite optimism, Viridian Capital Advisors indicated a likelihood of DEA moving to schedule 3 to eliminate 280e benefits, but expressed skepticism about the possibility of the President expediting this process before the election. The uncertainty lies in the timing for public comment periods and potential challenges to rule-making by the DEA, which could elongate the process.
Finding Investment Opportunities
Against this backdrop, Viridian Capital Advisors conducted a rigorous screening process to identify promising investments:
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Narrowing the search to companies ranked in the top ten in the Viridian Capital Credit Tracker Model, ensuring resilience in the face of delayed positive catalysts.
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Excluding companies trading at more than 2x their 52-week lows to mitigate susceptibility to pullbacks, such as Grown Rogue (GRIN), Glass House Brands (GLASF), and Curaleaf (CURLF), and focusing on those exhibiting potential for growth.
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Selecting the five companies with the lowest EV/2024 EBITDA ratios, all trading at less than 7x EV/2024 EBITDA, thus embodying strong growth potential while being attractively priced.
Among the selected companies, Marimed (MRMD) stands out, trading at only 1.1x its 52-week lows and possesses the potential to outperform in 2024. Despite missing third-quarter estimates, the company is trading at a mere 4.3x consensus 2024 EBITDA, indicative of its strong positioning for the year ahead.
Trulieve (TCNNF) likewise presents an enticing opportunity, trading at just 1.7x its 52-week low and 4.8x its 2024 consensus EBITDA. With improved balance sheet and profitability, it holds considerable potential, particularly in the event of a potential Florida adult use conversion.
Cresco (CRLBF) and Verano (VRNOF) also demonstrate promise, with Cresco being the riskiest but trading at only 1.8x its 52-week low and Verano exhibiting significant upside potential with lower pullback risk based on its strong credit ranking.
Finally, Planet 13 (PLNH) has shown resilience despite a challenging 2023, and with analysts projecting improved results for 2024, the company’s low-leverage balance sheet is a source of confidence.
In the unpredictable climate of 2024, it is imperative for investors to exercise caution by seeking out solid companies that can withstand the market’s turbulence without needing regulatory changes to survive. This cautious approach is critical, given the history of stocks surging on the promise of imminent regulatory changes, only to falter as these catalysts fail to materialize.
The Viridian Capital Chart of the Week serves as a valuable resource, highlighting key investment, valuation, and M&A trends distilled from the Viridian Cannabis Deal Tracker. This proprietary information service monitors capital raise and M&A activity in the legal cannabis, CBD, and psychedelics industries, providing insights vital for informed decision-making.
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Deals by Industry Sector (to track the flow of capital and M&A Deals)
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Deal Structure (Equity/Debt for Capital Raises, Cash/Stock/Earnout for M&A)
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Status of the company announcing the transaction (Public vs. Private)
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Principals to the Transaction (Issuer/Investor/Lender/Acquirer)
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Key deal terms (Pricing and Valuation)
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Deals by Location of Issuer/Buyer/Seller (To Track the Flow of Capital and M&A Deals by State and Country)
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Credit Ratings (Leverage and Liquidity Ratios)
Since its inception in 2015, the Viridian Cannabis Deal Tracker has tracked and analyzed more than 2,500 capital raises and 1,000 M&A transactions totaling over $50 billion in aggregate value, making it an indispensable tool for industry participants and investors alike.
In conclusion, the quest for investment opportunities in the cannabis sector requires diligent research and a discerning approach. It’s a landscape where prudence and rigorous scrutiny pave the way for success amidst the ebb and flow of market dynamics.
The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.
