As COVID restrictions begin to lift across Las Vegas and Nevada, Beacon Securities analyst Doug Cooper is expecting big things from Planet 13 (Planet 13 Stock Quote, Chart, News, Analysts, Financials CSE:PLTH). Cooper reviewed the cannabis company’s latest quarterly numbers in an update to clients on Friday where he reasserted his “Buy” rating and upped his target price from C$9.00 to C$11.50 per share.
Planet 13 is a vertically integrated company with cultivation, production and distribution assets in Nevada which runs the Superstore, a 100,000 sq ft facility cannabis outlet in Las Vegas. With COVID-19 cases dropping across the United States, Nevada is now relaxing its restrictions as vaccinations work to reduce the spread of the virus and its variants.
The US Centers for Disease Control announced in mid-May that Americans could stop wearing masks in most indoor and outdoor spaces. Since then, the Nevada Gaming Control Board has followed suit in giving casinos the ability to set their own operating rules, with companies like Wynn Las Vegas and MGM Resorts permitting vaccinated employees and guests to go maskless indoors.
Then last week, the Gaming Control Board said all COVID-19 mitigation protocols would be rescinded as of June 1, including social distancing and occupancy limitations at casinos and hotels. Resorts are now reporting 100-per-cent occupancy.
The changes have brought good fortune to Planet 13, which reported its first quarter 2021 financials on Thursday, showing revenue up 42 per cent year-over-year and adjusted EBITDA of $5.2 million compared to $2.4 million a year earlier. Gross profit before biological adjustments was $12.8 million or 53.8 per cent as compared to $9.0 million or 53.9 per cent. (All figures in US dollars except where noted otherwise.)
“After a slower January and February due to COVID-19 related restrictions in place in Nevada, we had an absolutely outstanding March, April and now May,” said Larry Scheffler, Co-CEO of Planet 13, in a press release.
“It is clear that Vegas is back, and with hotels and casinos across the strip reporting being fully booked for the foreseeable future we think it’s just getting started. After a year of fighting against the largest possible macro storm, it feels great to have the wind at our backs and to see all the improvements we put in place start to pay off,” Scheffler said.
P13 closed in February on a C$69-million upsized bought deal, while also in February breaking ground on its California SuperStore in Orange County. The company ended its Q1 with cash of $141.1 million compared to $79.0 million for the previous quarter and total liabilities of $35.0 million compared to $29.3 million at the end of Q4 2020.
Cooper called Planet 13’s first quarter a huge bounce-back in terms of gross margin, where it hit 57.5 per cent compared to the previous quarter’s 41.3 million and took quarterly EBITDA from $0.3 million in Q4 2020 to $5.3 million.
“Looking into Q2/FY21 and beyond, we believe we are going to witness something truly special from Planet 13. It is like the company is sitting at the poker table with four aces with one up their sleeve, but it is the shareholders who will reap the rewards of the jackpot,” Cooper wrote.
The analyst said Planet 13’s announced revenue for April ($10.7 million compared to $9.7 million in March) foreshadows a strong May and June, with tourists returning and hotel operations in full swing once again.
Cooper said P13 has clearly become the ‘only game in town’ for the tourist, where the company’s March market share in Nevada and Clark County was ten per cent and 12.5 per cent, respectively.
Cooper said P13’s store in Santa Ana is about to open and is likely to be a “huge success,” with the analyst pointing to the population centres at its disposal (about 15 million people in Orange County and LA County.
As for a potential ace up its sleeve, Cooper said it could come from approving cannabis lounges in Las Vegas.
“If so, we believe P13 is the only dispensary who has the space, the money to kit it out properly and the brand to attract such customers. Such an operation would be accretive to our model,” Cooper wrote.
By the numbers, the analyst thinks Planet 13 will generate full 2021 revenue and adjusted EBITDA of $142.3 million and $43.7 million, respectively, and 2022 revenue and adjusted EBITDA of $223.0 million and $78.0 million, respectively. Cooper’s raised target of C$11.50 represented at the time of publication a projected 12-month return of 16 per cent.
“Quite simply, Planet 13 is one of the best managed companies we have covered in our career. It has not only built a seminal cannabis asset when most people said it wouldn’t work, but it successfully pivoted to local market in the face of the worst hit to the tourist market in history. Now with the LV in full re-open mode and CA beckoning, we are all-in on P13’s success,” Cooper said.