Viridian Capital Advisors kicked off 2024 by naming the five stocks that they think have the best upside momentum.
While many in the industry are feeling very positive about a potential rescheduling of cannabis, the team at Viridian isn’t so sure.
“We are less inclined to think that the president will somehow push this through in time for the election,” Viridian wrote. “The DEA’s process includes public comment periods and opportunities for challenges to its proposed rule-making. The timing to run this gauntlet is unclear but likely longer than the market wants to believe.”
With that in mind, Viridian’s list includes companies that may have room to run higher even if the rescheduling gets pushed to a much later date.
The firm’s search for its top five started with companies ranked in the top 10 of its Capital Credit Tracker. Analysts then filtered the results to identify companies trading at less than 2x their 52-week lows, which eliminated several companies that Viridian likes but that it said could be susceptible to a pullback, including Grown Rogue International (CSE: GRIN), Glass House Brands (OTCQX: GLASF), and Curaleaf Holdings (CSE: CURA), which are trading at 3.3x, 2.6x, and 2.1x their 52-week lows, respectively.
With a list trimmed down to seven, analysts simply turned to the five stocks trading at the lowest EV/2024 EBITDA. “Each of the five companies in the chart is trading at less than 7x EV/2024 EBITDA. Green Thumb (CSE: GTII) and TerrAscend (TSX: TSND) were eliminated,” the firm wrote.
In the end, the top five stocks picked by Viridian Capital Advisors, as covered in its report, are:
- MariMed (CSE: MRMD) missed its third-quarter estimates, which may be why it is trading at only 1.1x its 52-week lows. But Viridian believes it is “well poised for 2024.” It currently trades at only 4.3x consensus 2024 EBITDA.
- Trulieve Cannabis Corp. (CSE: TRUL) climbed 14.4% last week, and yet it “continues to trade at only 1.7x its 52-week low and 4.8x its 2024 consensus EBITDA.” Viridian cited significant improvements to the company’s balance sheet and overall profitability as factors for its positive outlook. Trulieve also has “strong optionality with regard to a potential Florida adult-use conversion.”
- Cresco Labs (CSE: CL) ranks at number 10 on Viridian’s Cannabis Credit Tracker, making it the biggest credit risk on this list. But the firm still expects Cresco to outperform the market based on it trading at only 1.8x its 52-week low and 6.06x 2024 EBITDA.
- Verano Holdings Corp. (CBOE: VRNO) is the third strongest credit in Viridian’s rankings, and “at 6.4x 2024 EBITDA, it has significant upside potential with lower-than-average pullback risk.”
- Planet 13 Holdings (CSE: PLTH) “had a difficult 2023,” according to Viridian, “with lower Las Vegas crowds and some stumbles in establishing its Florida presence, resulting in a modestly negative EBITDA year.” But its balance sheet isn’t highly leverages and 2024’s outlook is rosier, leading to the company’s inclusion in this list.
Ultimately, Viridian advises investors to look for solid companies and not ones that are dependent upon change to survive. As they say in finance: Hope is not a strategy.