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The launch of Ohio’s recreational cannabis market on August 6 has set the stage for significant growth, with early data showing a 45% sales increase at various marijuana shops in just two weeks. Wholesale performance has also been strong.
“Ohio began non-medical sales on 8/6/24, but full AU rules aren’t out yet, limiting growth. In the first 26 days, total rec/med sales reached $75.6M, implying an annualized run rate of $1.06B, compared to $480M in 2Q24 (just med). We expect Ohio to reach 3-4x its current med base once the full AU program is in place,” Pablo Zuanic, senior analyst at Zuanic & Associates, wrote in a Friday night note.
This positions cannabis company Vext Science Inc. VEXTF as a rising contender among multi-state operators (MSOs).
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2Q24 Financial Performance
Despite positive trends in Ohio, Vext’s overall sales declined by 8% year-over-year in the second quarter, primarily due to challenges in Arizona where sales, which accounted for 61% of total revenue, fell by 34%, driven by price deflation and increased competition.
Zuanic’s report noted that despite outperforming the state average, Vext’s Arizona stores still faced pressures. On the other hand, Ohio sales grew by 141%, partially boosted by mergers and acquisitions.
“Vext’s profitability suffered due to startup costs in Ohio, with gross margins in both states declining by around 10 percentage points year-over-year,” Zuanic wrote.
Read Also: Ohio’s Sales Surge Might Cast Trouble For Michigan’s Cannabis Market: Here’s Why
Valuation And Future Projections
Zuanic highlighted Vext’s current enterprise value (EV) of $77 million with a market cap of $43 million and $32 million in net debt. On a forward-looking basis, he projects that Vext could achieve a fivefold increase in valuation by late 2025, trading at 1.2x sales and 4.5x EBITDA by 4Q25.
“The company’s high EBITDA torque to Ohio’s recreational market makes it a compelling investment within the MSO group,” added the senior analyst.
With further store expansions planned in Ohio and improvements in Arizona, Vext is expected to generate positive free cash flow (FCF) in the coming quarters, per the report.
Read Next: The King Of Ohio’s Recreational Cannabis Market? Here’s Why Investors Should Follow This Weed Stock
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“}]] Senior analyst Pablo Zuanic noted In the first 26 days, total weed sales in Ohio reached $75.6M, implying an annualized run rate of $1.06B. Read More
