Nevada cannabis company Planet 13 (Planet 13 Stock Quote, Chart CSE:PLTH) has seen its share price knocked down over the past month, with the latest salvo coming in response to news that the company wasn’t awarded any new dispensary licenses in the state during the latest of licensing round, leaving it still with just one store for the time being. But, oh, what a store.
At over 112,000 sq. ft. and boasting daily average visits of 1,400, P13’s Las Vegas SuperStore —billed as the “world’s largest weed store”— should be more than enough to keep investors happy, argues Doug Cooper, analyst for Beacon Securities, who in a valuation and strategic update to clients on Monday reiterated his “Buy” rating and C$7.25 target price for PLTH.
“We believe the shares of P13 have been unjustly punished after the news that it did not receive a license in the latest round in Nevada,” says Cooper.
The analyst delivers a laundry list of reasons why investors needn’t worry about the “one store” issue, prime among them being that P13’s Superstore occupies a prime location right next to the Las Vegas Strip, putting it in prime territory for tourism..tourist cannabis dollar, which Cooper calculates at 72 per cent of the state’s first-year cannabis sales of $530 million. (All figures in US dollars unless noted otherwise.)
“In retail, the 3 most important factors are location, location and location. No-one is better positioned than P13 to capture the tourist cannabis dollar,” says Cooper.
The huge size will be a plus going forward, says Cooper, who points out that on-site cannabis consumption should become a reality in the near future, which will work out well for P13 and its plans to construct a 10,000 sq. ft ultra lounge on the premises.
Valuation-wise, PLTH looks to be a bargain, too, says Cooper, who places the company’s enterprise value at $95 million and its EBITDA for 2019 at approximately $37 million, giving and EV/EBITDA of 2.5x.
“As tax-loss selling ends and the focus moves to January —the convention season and the start of positive regulatory changes— we believe the shares are unbelievably priced (i.e. cheap) for those positive events as well as for P13’s potential as a prime acquisition target catering to the tourists. Such assets are dwindling fast (GTI’s acquisition of Essence for $290 million) and we believe the scarcity factor will also have a very positive impact on the share price,” says Cooper.
The analyst’s C$7.25 target price represented a projected 12-month return of 489 per cent at the time of publication.