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Acreage Holdings Inc (OTCMKTS:ACRGF) Undervalued Despite Wider Than Expected Net Loss

Acreage Holdings Inc (OTCMKTS:ACRGF) Undervalued Despite Wider Than Expected Net Loss
Written by
Jim Bloom
Published on
March 17, 2019
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Acreage Holdings Inc (OTCMKTS:ACRGF) sentiments in the market have turned sour after reporting a wider than expected net loss of -$217.6 million for Q4 2018. The stock has since taken a beating, after an excellent start to the year. After skyrocketing to the $24 a share level, the stock has come down tumbling on soaring short selling pressure.

ACRGF Share Price Analysis

A plunge below the $15 a share level comes even on the company reiterating that the wider than expected net loss was as a result of non-cash charges and one-time items. The company also registered an impressive year as revenue in Q4 increased by 380%.Amidst the sell-off rage, Acreage Holdings has embarked on an aggressive expansion drive in pursuit of new opportunities that would strengthen revenue channels. The company has since entered California Dispensary market having also set its toes on the North Dakota Medical Marijuana industry. ACRGF Daily ChartAmidst the positive developments, the stock has continued to edge lower having shed more than 20% in market value from 2019 highs. A plunge to the $17 a share level leaves the stock susceptible to further drops as it has breached a critical support level at $18 a share mark.For the stock to turn bullish, it needs to rally and stabilize above the $19 a share mark. Below the $19 a share level, Acreage Holdings remains vulnerable to further drops in continuation of the emerging downtrend.

What Does Acreage Holdings Do?

Acreage Holdings casts itself as a principal investment firm focused on the cannabis sector. Billed as one of the largest vertically integrated and multi-state cannabis operator, the company is dedicated to building and providing consumer-focused cannabis experience. The company owns cannabis licenses and management services in 19 states.

Recent developments

Acreage Holdings is taking a beating in the market on plunging into a wider than expected net loss of -$217.6 million in 2018, compared to a net loss of -$4.8 million reported a year earlier. The company attributes the wider than expected net loss to one-time charges.The company has also sought to defend itself over the dismal performance on the earnings front reiterating that it spent over $200 million on various strategic transactions. The company also invested about $37 million in strengthening its operations in the cannabis sector. Revenue in Q4 was up 380% to $10.5 million as full-year revenue increased 173% to $21.1 million, a further indication of underlying growth.

Expansion Drive

Expansion into new markets in pursuit of new revenue streams has also come into play as the company continues to build its empire. For starters, the company has expanded its footprint into California as it looks to solidify its position as one of the largest multistate license operators.The company has since agreed to acquire California based Kanna, Inc. The acquisition holds a license to operate a cannabis dispensary in Oakland. The acquisition will provide the company with access to a limited competition market, as Oakland allows only 16 adult use dispensaries.

“I could not be more excited about our first dispensary operation in California, especially one in a limited competitive market. While this is our first, it is nowhere near our last, as we expect to significantly expand our dispensary footprint in the state over the coming months," said Kevin Murphy, Founder, Chairman, and Chief Executive Officer of Acreage Holdings, Inc.

Expansion into California comes on the heels of Acreage Holdings setting toes in North Dakota with the opening of a medical marijuana dispensary. The company now owns one of the two dispensary licenses in the state.Acreage Holdings is also licensed to open as many as four stores in New York. It has also set sights on Florida’s cannabis market with the purchase of Nature’s Way Nursery of Miami that it acquired for $67 million early in the year.

Bottom Line

A wider than expected net loss has dealt Acreage Holdings sentiments a big blow. Amidst the disappointments one cannot dispute, the fact that the company’s underlying business is growing at an impressive rate.Robust revenue growth affirms a company that is in a phase of growth despite the disappointments on earnings. Expansion into new markets in pursuit of opportunities for growth is another development that underscores the company’s long-term prospects.That said the stock is still an exciting pick as a long-term pick given the underlying business fundamentals and growth.We will be updating our subscribers as soon as we know more. For the latest updates on ACRGF, sign up below!Disclosure: We have no position in ACRGF and have not been compensated for this article.

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