Planet 13 Holdings PLNH, a multi-state cannabis operator, finds itself trailing 55% behind its peers in this quarter, grappling with the aftermath of untimely equity offerings and allegations of embezzlement, as per senior analyst Pablo Zuanic.
Despite the hurdles, the company’s stock is trading at a 35% markdown, valued at 1.1x 2024 sales—lower than the industry’s average of 1.7x.
Zuanic advocates for Planet 13’s bright future, especially with the promising landscape of Florida’s market on the horizon. With its retail supremacy in Nevada and a flexible superstore model, the company is primed for expansion, banking on potential cannabis legalization in Florida.
Navigating Legal Challenges in the Cannabis Sector
Planet 13 Holdings has initiated a $16.5 million lawsuit against Casa Verde Capital, co-founded by Snoop Dogg and El Capitan Advisors for alleged fraudulent activities. Lodged in Los Angeles, the suit accuses both entities of deceptively showcasing their success in cannabis investments to allure clients, including Planet 13, which entrusted them with $21 million.
Planet 13 argues that El Capitan served as a front for Casa Verde to profit at its expense. The company seeks damages and judicial oversight over El Capitan, aiming to recuperate its losses. While Casa Verde refutes any malfeasance, expressing disappointment at the legal action despite offering cooperation.
Examining Financial Progress And Future Projections
The final quarter of 2023 witnessed a reduction in total sales, particularly in Nevada and California. Nevertheless, enhancements in gross margins and a decrease in cash SGA have enhanced the EBITDA margin, signifying a more favorable financial outlook.
This showcases the company’s heightened profitability per sale and decreased expenditure on operational costs, culminating in a healthier bottom line. Planet 13 concluded CY23 with $17.3Mn in cash, with expectations of reaching $33Mn post the VidaCann deal closure.
Strategic Initiatives And Growth Prospects
PLNH’s strategic plans encompass the acquisition of VidaCann, fundraising activities for expansion, and reassessing tax positions to potentially reclaim overpaid taxes.
The acquisition of VidaCann positions PLNH to leverage the burgeoning Florida market, with intentions to exponentially grow its retail footprint. The company’s focus on expanding in Nevada and refining operational efficiencies is anticipated to propel future growth and augment shareholder value.
Capitalizing on Market Expansion and Opportunities
Florida emerges as a lucrative prospect for Planet 13, offering substantial revenue upsurge and EBITDA margin increment from the state’s recreational market.
As per Zuanic, the company’s strategy of introducing new brands and operational enhancements in VidaCann stores, alongside an extensive network expansion plan, exemplifies its commitment to securing a larger market share in Florida.
Analyzing Valuation and Investment Outlook
Despite recent setbacks, including a noticeable stock price dip, PLNH’s proforma valuation underlines a significant discount in comparison to sector averages.
The assessment implies that the stock’s current valuation does not entirely encapsulate the potential EBITDA growth from the Florida market, the scalability of its superstore concept, and the strategies to fortify its Nevada operations.
“With a proforma enterprise value (EV) of $164Mn and a stock price of $0.56, the company has proforma net cash of $33Mn and trades at 1.1x its projected 2024 sales of $148Mn. This valuation is a 35% discount compared to the sector average of 1.7, highlighting its undervalued standing,” according to the report.
