Take a pass on Planet 13 for the time being, this investor says

Nevada-based cannabis company and operator of the self-proclaimed “world’s largest weed store” in Las Vegas, Planet 13 Holdings (CSE:PLTH) could very well have a bright future ahead of it, says James Hodgins of Curvature Hedge Strategies, but just like the pot industry itself, there’s still a lot that needs to be proven before investors should be getting behind this venture.

Planet 13 opened up its 112,000 sq. ft. Las Vegas SuperStore on November 1, with the aim of luring in some of those tourist dollars, which at only a year and a half into recreational legalization amounted to a whopping $530 million in its first year. (All figures in US dollars.)

The company recently had a setback when it was denied new dispensary licenses by state authorities during the latest licensing round, but management appears satisfied for the moment with the growth in traffic at its just-off-the-Strip SuperStore, which is reportedly averaging 1,400 visits a day.

“The [dispensaries] off the strip, they’re really fighting for the 2.3 million locals,” says co-CEO Larry Scheffler, to cheddar.com . “We moved here, close to the Strip, because we’re going after the 55 million visitors. Even if we get 5,000 people a day that only amounts to 3.3 per cent of the tourists coming to town.”

Already, the stock has had a wild ride since its debut in June, rising from C$1.80 to C$3.50 by early November only to plummet over ensuing weeks to where it currently trades in the C$1.20 range.
Hodgins says that because it is still in the formative stage, investors should be cautious about the
marijuana space.

“This stock has done a real round-trip,” says Hodgins, chief investment officer at Curvature, to BNN Bloomberg. “They’re opening this big marijuana supercentre just off the Strip in Vegas. It sounds great and I’m sure they’ll do a good business out of that. We just thought it got pretty expensive.”

“The sector is still in the speculative part of the market and that’s where we see capital flowing out of right now,” he says. “I’m waiting-and-seeing on something like this and even on the whole sector.”

Planet 13 released its third quarter ended September 30 financials last month, generating revenue of $4.9 million and a net income loss of $835,000. In early December, the company closed on a C$26.4-million bought deal financing round which management says will go towards future dispensary operations in Nevada as well as further construction at its Las Vegas SuperStore location.