Jushi Holdings Inc. (CSE:JUSH) (OTCQX:JUSHF) will announce its financial results for the third quarter before the market opens on Monday, November 14, 2022.
Meanwhile, What Does The Data Say? An Expert's Analysis
Cantor Fitzgerald's Pablo Zuanic offered an update on the company. “We stay Neutral and maintain our 12-month price target of $2.25. While management has not provided 3Q guidance, we think the qtr may be a mixed bag, with some markets down for them (Pennsylvania and Nevada) and others up (Illinois, Massachusetts, and Virginia)," Zuanic said.
How Does The Market Impact States With Jushi’s Presence?
In Pennsylvania, Zuanic noted that "the rising store count and lower prices have hurt retailer economics." Moreover, "Virginia is growing, but it is still well below the top-line contribution of Illinois and Pennsylvania," said Zuanic, who also estimates that the total size of Virginia's medicinal market now exceeds $100 million. "Clearly, both VA/PA offer rec optionality (VA rec to start Jan’24; PA less clear). New capacity in VA/PA should be more visible by 4Q and into 2023."
Currently, the multi-state operator has thirty-five stores: eighteen in PA, four in IL, four in Virginia, three in California, and two in Nevada, and Massachusetts, respectively. By the fourth quarter, the company will add a store in both Virginia and Ohio, ending the year with 37 in total, according to the analyst report.
Despite two stores being added in Virginia during 3Q, "they will only show a full qtr by 4Q. Also, one of the Pennsylvania stores was closed during 3Q (just reopened)," noted the Cantor analyst.
Additionally, Cantor projects "a flat third quarter seq (FactSet consensus has +4%), with an 8% ramp into 4Q to $78.4Mn (still shy of the 4Q guidance range of $80-87.5Mn)," Zuanic noted.
Jushi’s Profit Margins
According to the market's report, the company's profit margins "have partly been dragged down by capacity expansion projects (not yet operational) in Pennsylvania and Virginia, so over time, we would expect a margin lift (guidance points to low double-digit EBITDA) margins for 4Q22 vs. 0.7% in 2Q22," Zuanic said.
In general, while "we rate the stock Neutral, we value the company’s Virginia franchise (located in a populated area), the Pennsylvania retail network, and the company’s well-performing Illinois stores," according to the expert, who also added he thinks the consensus is high "for CY23 we are 15% below on sales and 33% below on EBITDA."
Valuation And Price Target
In Cantor's view, "recent sector volatility makes price targets and valuation multiple discussions less relevant."
More than fundamentals or 3Q earnings, "we think bigger drivers of sentiment right now for MJ stocks are the potential for SAFE Plus passage, potential copycats of the Canopy (NASDAQ:CGC) USA structure (if approved by the US exchanges), sectoral M&A, and (for those with international ambitions) the German legalization process," said Zuanic.
Jushi stock closed up 9.15% at $1.67 per share on November 3, and "the stock is up 23% in the last month vs. +10% for the MSOS ETF," said Zuanic. "On our CY23 estimates (we are 15% below consensus on sales and 33% below on EBITDA), the stock trades at 2.3x sales (2.1x MSO average) and 16.3x EBITDA (8.9x)."
"We set our Dec 2023 price target (12 months out) based on a 10% premium only to the average sector multiple for CY23 (see appendix) on our 12-month forward estimates, and this yields a price of US$2.25. Given sector volatility, we require at least a 50% upside to rate stocks as Overweight," Zuanic concluded.
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