Pablo Zuanic from Cantor Fitzgerald kept a rating of “Neutral” on Ayr Wellness Inc. (OTC: AYRWF) stocks and lowered its 12-month price target to $6.75 from $13.30, due to reduced estimates and overall sectoral derating.
AYR reported stable sequential sales growth, though EBITDA margins dropped 6 points quarter-to-quarter. “However, management expects a sales and margin ramp in the back half of 2022, as it begins rec sales in NJ/MA and expands across its footprint,” Zuanic said in a May 26 analyst note.
“The stock trades at a peer discount, but we think this is justified on above-average debt leverage (1.8x sales, taking a broad definition), stock-based compensation (9% of sales in the first quarter of 2022), and execution risk,” the analyst said.
“Given sector volatility and depressed sectoral valuations (…), we take a lower-risk approach and prefer companies with above-average breadth/depth, more established operations, stronger balance sheets, and less execution risk. In that context, we rate AYR Neutral,” Zuanic concluded.