Equity research firm Zuanic & Associates, helmed by senior analyst Pablo Zuanic, has initiated coverage of Gold Flora GRAM with an Overweight rating.
The California cannabis market is the largest in the United States with over $5 billion in retail sales, and it shows significant growth potential despite its lower per capita spend compared to other states, owing to high sales taxes, limited store density, and regulatory challenges.
Position of Gold Flora
Following the merger between The Parent Company and Gold Flora, the company now holds the 3rd largest retail chain in the state and ranks in the top nine in brands. With $32 million in cash on its balance sheet and negligible net debt, the company enjoys financial stability.
Retail Landscape and Expansion Potential
California’s retail landscape features 1,241 active storefront licenses, and Gold Flora, primarily located in limited-license municipal jurisdictions, is well-positioned within this retail sector, providing opportunities for expansion and consolidation.
Company Strategy and Growth Outlook
Gold Flora plans to expand further, particularly in license-restricted areas and coastal/tourist regions. By mid-2024, the company will have significantly increased its indoor cultivation capacity, allowing for a wider range of products and improved margins.
Brand Portfolio
The company’s brand portfolio is the 9th largest in California, aiming to gain further market share, particularly in the flower category, which remains fragmented.
Financial Position and Valuation
With $32 million in cash and plans to achieve positive free cash flow over the next two years, Gold Flora’s valuation reflects a compelling opportunity, with the stock valued at 0.6x sales and 3.4x EBITDA.
Bull and Bear Scenarios
In a bullish scenario, Zuanic foresees Gold Flora capturing a larger market share in California, whereas in a bearish scenario, market challenges and increasing competition could pose risks, although the company’s disciplined approach to its brand and retail portfolio could help mitigate these risks.
Photo: AI-Generated Image.
