Beacon Securities analyst Doug Cooper is encouraged by the latest results from Las Vegas-based cannabis company Planet 13 (CSE:PLTH).
In an update to clients on Tuesday, Cooper said P13’s performance during the dark days of COVID-19 are a sign of the company’s bright future ahead.
Planet 13, a vertically-integrated cannabis business in Nevada centred around the 16,500 sq ft Cannabis Superstore located just off Las Vegas Boulevard, released its first quarter 2020 financials on Monday.
The end of the Q1 included the first two weeks of the virtual shutdown of tourism in Vegas, along with the closure of cannabis shops to all but delivery and then curbside pickup. In the company’s press release, co-CEO Larry Scheffler said the traffic drop-off during COVID-19 was sharp.
“We continued to grow our market share in Nevada during the quarter, with the SuperStore accounting for 10.1 per cent of all retail cannabis sales in the state in the quarter – our best yet,” Scheffler wrote.
“While Q2 has been a challenging period for all Nevada businesses, Planet 13 pivoted quickly to a delivery-based model, which has significantly lessened the impact of lower tourist traffic, while broadening the SuperStore’s long-term customer base and opportunity set. As Nevada has started reopening, allowing both curbside pickup and limited in-store sales, we have seen a corresponding pickup in sales,” he said.
On the quarterly numbers, P13 hit $16.8 million in revenue compared to $13.8 million a year ago with adjusted EBITDA of $2.5 million compared to $1.7 million for last year’s Q1. The company ended the quarter with cash of $13.9 million. (All figures in US dollars except where noted otherwise.)
Cooper said the results came in-line with management’s pre-announced numbers and that, essentially, they tell of a growing business up until the point of COVID-19, one for which March was looking to be another record month.
Breaking down the numbers per month, Cooper pointed to a rise in daily customers from January’s 1,947 per day to February’s 2,208 and then 2,058 customers up until March 17, with revenue for the three months being $6 million, $6.4 million and $3.4 million, respectively. As for market share, Cooper figures P13 had 12 per cent of the state in February and about 15.5 per cent for Clark County.
“While we know that the NV tourism has been shut-down since mid-March, a material positive did come out of the situation, namely P13 turning its attention to the local market,” Cooper wrote.
“Assuming locals represent 50 per cent of the NV market and given that P13 quickly ramped-up its delivery service to ~$100,000 rev/day, we believe its local market share is now ~10%, up from low-single digit prior to the SS closure. If it can maintain even half of this share as the tourist market re-opens, it is significantly accretive to the company,” he said.
Cooper also highlighted P13’s recent move into California with the purchase of a license in Santa Ana for $5 million, and the analyst has now added a California store to his fiscal 2021 forecast.
“That P13 will have a weak Q2 is well understood by the market. However, what is not fully understood, in our opinion, is the potential to gain more market share in Nevada (from the locals as well as more tourist share as some larger players recede from the market) and its potential in California,” Cooper wrote.
The analyst is calling for fiscal 2020 revenue and adjusted EBITDA of $46.4 million and $5.2 million, respectively, and for fiscal 2021 revenue and adjusted EBITDA of $119.8 million and $30.9 million, respectively.
With the update, Cooper reiterated his “Buy” rating and C$4.50 target, which at press time represented a projected one-year return of 163 per cent.