With one of the industry’s best balance sheets along with still-strong growth prospects, Nevada-based cannabis name Planet 13 Holdings (Planet 13 Stock Quote, Charts, News, Analysts, Financials CSE:PLTH) has a lot to offer investors, according to Beacon Securities analyst Doug Cooper. In a Monday review of the company’s latest quarterly results, Cooper reiterated a “Buy” rating while lowering his target price from C$2.75 to C$2.00, which at press time represented a projected one-year return of 83 per cent.
Planet 13, a vertically-integrated cannabis company with cultivation, production and dispensary operations in Nevada and California, announced its fourth quarter financials on March 23, showing revenue down 17 per cent to $24.8 million and an adjusted EBITDA loss of $0.8 million compared to positive EBITDA of $1.9 million a year earlier. (All figures in US dollars except where noted otherwise.)
The company, which owns the 100,000 sq ft cannabis and CBD SuperStore close to the Las Vegas Strip, said a drop in pricing and a weaker economic environment resulted in the revenue hit.
“Towards the end of Q4 we saw those pricing compression trends start to stabilize and we remain optimistic about the outlook for 2023,” said Larry Scheffler, Co-CEO, in a press release. “Despite the pressures on retail, we grew wholesale revenue by 26 per cent year over year and had a top five brand in every product category. Moreover, in California, we increased our share of shelf and wholesale revenue every quarter.”
Cooper said the quarterly results were essentially in-line with expectations, while on a segmented basis, the Las Vegas SuperStore saw revenue decline 31 per cent year-over-year and six per cent sequentially to $14 million, its Medizin business essentially flat at $2 million, Curbside and Delivery also flat at $2 million and California sales at $4.9 million.
At the same time, Cooper said P13 was holding its own in Nevada, maintaining about an 8.5 per cent market share in the state and about an 11 per cent market share in Clark County. As well, the company’s gross margin increased by about 400 basis points, Cooper noted, and management said pricing has likely reached its nadir in Nevada.
The same could be said for the stock, according to Cooper, where PLTH, like the rest of the cannabis space, has suffered through a prolonged pullback since early 2021.
“As we look ahead to ahead to not only FY23 but more importantly FY24, we believe the shares of PLTH have likely bottomed and do not reflect the stabilization in NV, its gains in CA nor the contribution from Florida and Illinois, both of which should start to materially contribute in FY24,” Cooper said.
Cooper is estimating Planet 13’s revenue going from $104.6 million in 2022 to $115.2 million in 2023 to $151.3 million in 2024 and for adjusted EBITDA to go from $3.6 million in 2022 to $11.1 million in 2023 and to $20.0 million in 2024.
“While PLTH has not been immune from the cannabis carnage over the past two years, we believe it is important to note that its balance sheet (including fully paid-up on income taxes) is one of the industry’s best. This is enabling it to grow while others may be forced to contract with revenue potential +50 per cent over the next two years from a rebound in NV and new states,” he said.