Improvement in the company’s liquidity is cause for a target raise on US MSO Jushi Holdings (Jushi Holdings Stock Quote, Chart, News, Analysts, Financials CSE:JUSH), says Beacon Securities analyst Russell Stanley, who has increased his one-year price target price target from C$8.75 to C$9.50.
Jushi has run up plenty over the past 12 months, but there’s more upside to come, said Stanley, who delivered an update to clients on Thursday.
Cannabis multi-state operator and Florida-based Jushi is owner or part-owner in a number of cannabis assets across Illinois, California, Pennsylvania and Virginia along with the Beyond/Hello dispensary brand. The company debuted on the CSE in December 2019 and has since seen its share price climb from C$1.50 to now above C$7.00.
Jushi last reported earnings in late November where its third quarter 2020 featured revenue up 67 per cent sequentially to $24.9 million, a net loss of $30 million and adjusted EBITDA of $1.9 million, up from negative $1.2 million for the previous quarter.
The most recent news on Jushi is the company’s closing on an overnight marketed prospectus offering including full over-allotment for gross proceeds of C$40 million at C$6.50 per subordinate voting share. Jushi said the net proceeds of about $30 million will go towards working capital and general corporate purposes with up to one-third going towards repaying a portion of its ten-per-cent senior secured notes maturing in January 2023 (of which $83 million in principal was outstanding at the end of the company’s last reported quarter). (All figures in US dollars except where noted otherwise.)
“I’m thrilled with the support we continue to receive from our shareholders. With this financing complete, we have a strong balance sheet to further accelerate our revenue growth and profitability as we enter 2021,” said Jim Cacioppo, CEO, Chairman and Founder, in a press release. “The opportunity in the legal U.S. cannabis industry is immense, and Jushi is strategically positioned with both the capital and talent to expand in the highest quality markets as we continue to build our business.”
The news comes after the receipt of $32 million in warrant proceeds in December, followed by announced plans to accelerate the expiry on another 3.6 million warrants with a C$3.54 per share exercise price.
In his update, Stanley noted management’s reiterated 2021 guidance, along with a recent increase in its forecast for the upcoming fourth quarter. Jushi is calling for 2021 revenue of between $205 and $255 million and adjusted EBITDA of between $40 and $50 million, while for the Q4, management is predicting revenue of between $32 and $33 million, up from the previous forecast of $28 to $30 million, with adjusted EBITDA reiterated at between $2.5 and $3.0 million.
“When we originally initiated coverage in October 2020, we valued JUSH at a 25-per-cent discount to where US operators were then trading, given the stock’s relative illiquidity,” Stanley wrote. “Its liquidity has since improved 5x on a volume basis and 16x on a daily value traded basis (both based on 20-day averages), which should significantly broaden the investor audience, particularly with the stock’s fully diluted market capitalization now well over $1 billion. With pro forma cash of $132 million, we estimate that JUSH has $70 million-plus available to fund growth opportunities (organic and M&A), net of expected CAPEX. On that basis, we are increasing our valuation multiple from 12x to 13x (still a 19-per-cent discount to the US operator average), and we are increasing our price target from C$8.75/sh to C$9.50/sh.”
On the company’s progress, Cacioppo said in the third quarter press release, “Our strategic roll out continues and I’m pleased with the initial reception following the recent openings of our latest BEYOND/HELLO retail stores in Santa Barbara, California and Reading, Pennsylvania.”
“As previously announced, we are also looking forward to opening our first retail dispensary in Virginia, two additional stores in Illinois, and further enhancing our newly acquired grower-processor facility in Scranton, Pennsylvania,” he said.
For his part, Stanley thinks Jushi will generate 2020 revenue and adjusted EBITDA of $80 million and negative $2 million, respectively, 2021 revenue and adjusted EBITDA of $223 million and $45 million, respectively, and 2022 revenue and adjusted EBITDA of $403 million and $141 million, respectively.
“Potential near-term catalysts include the opening of the fouth dispensary in Illinois in Q1, followed by the continued retail and cultivation build-outs in Pennsylvania (pop. 12.8 million), and the Q4/20 results,” Stanley said. “The stock has corrected into a test of its accelerated uptrend, making this an attractive entry point.”
In December, Jushi opened its third retail location in Illinois in Sauget, representing the company’s 13th store nationally. The store is open under the BEYOND/HELLO brand and serves the adult-use community, where Illinois’ total rec cannabis sales in its first year of operation are expected to reach $1 billion.
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