Planet 13 holdings PLNHa multi-state cannabis operator, fell 55% behind its peers this quarter, impacted by an ill-timed stock offering and alleged misappropriation issues, according to senior analyst Pablo Zuanic.
Despite these challenges, its shares trade at a 35% discount, with a valuation of 1.1x 2024 sales, lower than the industry average of 1.7x.
Zuanic reports strong prospects, especially with Florida’s looming market opportunities. Planet 13 stands out as a retail leader in Nevada with a scalable superstore model, poised for growth with the potential legalization of cannabis in Florida.
Legal conflict in the cannabis industry
Planet 13 Holdings has filed a $16.5 million lawsuit against The Green House of the Capitalco-founded by Snoop Dogg AND El Capitan advisors for alleged fraud. Filed in Los Angeles, the lawsuit accuses both companies of deceptively promoting their cannabis investment successes to attract clients, including Planet 13, which entrusted them with $21 million.
reported the Green Market Report.
Planet 13 claims that El Capitan was a front that allowed Casa Verde to profit at its expense. While seeking damages and judicial review over El Capitan, Planet 13 aims to recover the lost funds. Casa Verde denies any wrongdoing, expressing its disappointment at having been reported despite having offered collaboration.
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Financial data and projections
The fourth quarter of 2023 saw a decline in total sales, with notable declines in Nevada and California. However, improved gross margins and reduced cash SGA contributed to a more favorable EBITDA margin.
This means the company made more profits per sale and spent less on operating expenses, leading to better overall earnings before interest, taxes, depreciation and amortization. The company reported that it has become more efficient and profitable, improving its financial health.
Planet 13 closed CY23 with $17.3 million in cash, and after accounting for various transactions, management expects to have $33 million in cash following the closing of the VidaCann deal.
Strategic moves and future prospects
PLNH’s strategic initiatives include the acquisition of VidaCanncapital increases to finance expansion and assessment of tax positions to potentially recover millions in overpaid taxes.
The acquisition of VidaCann allows PLNH to capitalize on the Florida market, with plans to significantly expand its store network.
Additionally, the company’s approach to expanding its presence in Nevada and improving operational efficiency is expected to drive future growth and enhance shareholder value.
Market opportunities and expansion strategy
Florida represents a significant opportunity for Planet 13, with the potential for substantially increased revenue and EBITDA margin from the state’s recreational market.
According to Zuanic, the company’s strategy of bringing new brands and practices to VidaCann stores, along with plans to expand its store network, underscores its commitment to capturing a larger market share in Florida.
Pro forma valuation and investment prospects
Despite recent challenges, including a notable decline in share price, PLNH’s pro forma valuation reveals a substantial discount to the industry average.
The analysis suggests that the stock’s current valuation does not fully reflect the potential EBITDA growth of the Florida market, the scalability of its superstore concept and plans to strengthen its franchise in Nevada.
“With a pro forma enterprise value (EV) of $164 million and a share price of $0.56, the company has pro forma net cash of $33 million and trades at 1.1 times forecast sales for the 2024 equal to 148 million dollars. This valuation represents a 35% discount to the industry average of 1.7x, highlighting its underpriced status,” the report reads.
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