Jushi Holdings is a buy, Beacon says

Its Q2 results are in the books and Beacon Securities analyst Russell Stanley still likes what he sees from Jushi Holdings (Jushi Holdings Stock Quote, Chart, News, Analysts, Financials CSE:JUSH).

On August 7, Jushi reported its Q2, 2024 results. The company posted Adjusted EBITDA of $14.5-million on revenue of $64.6-million.

“Our second quarter performance underscores our efforts to strengthen our asset base while maintaining prudent cost-saving measures and we believe this will help position us on a steady path to sustained profitability,” CEO Jim Cacioppo said. “Our organization-wide operational improvement plan is yielding promising results, with gross margin reaching 50.4 per cent and adjusted EBITDA further improving to 22.4 per cent of revenue for the quarter. These successes were driven by efficiencies achieved mainly at our Virginia grower-processor facility and our ability to maintain a consistent output of our high-margin, top-selling product offerings. Additionally, Todd West, our newly appointed COO, has already played a crucial role in guiding additional enhancements across our business and we anticipate further progress throughout the remainder of the year under his direction.”

The analyst summarized the quarter.

“JUSH recently reported Q2 revenue/adjusted EBITDA of $65M/$14M v. our forecast of $68M/$14M and consensus at $68M/$13M. While the top line was short, that was offset by stronger-than-expected gross/adj EBITDA margins,” he wrote. “Gross margins were the standout in the quarter at 50%, 461 bps stronger than we modeled and up 103 bps q/q. The q/q improvement reflects increased verticality in the business, with JUSH branded products now representing 56% of retail sales in its five vertical markets (up from 47% y/y), giving the company full margin capture on most of the product sold through its stores. The gross margin strength was partially offset by higher-than-expected OPEX, but adjusted EBITDA margins still beat our forecast by 237 bps and improved 202 bps q/q. Jushi also produced operating cash flow of $9M before working capital, roughly 3x our forecast of $3M. Net of working capital investments, JUSH produced cash from operations of $6M, almost 2x our forecast.”

In a research update to clients August 9, Stanley maintained his “Buy” rating and price target of $1.75 on JUSH, implying a return of 136% at the time of publication.

The analyst thinks JUSH will post Adjusted EBITDA of $58.0-million on revenue of $266.0-million in fiscal 2024. He expects those numbers will improve to Adjusted EBITDA of $73.0-million on a topline of $325.0-million in fiscal 2025.

“JUSH now trades at 5.2x our F2025 adjusted EBITDA forecast of $73M, representing a 12% discount to the 5.9x average amongst US operators. Potential company specific catalysts include buildout updates, M&A activity (Ohio in particular) and the Q3 results in November,” Stanley added.