Item 9 Labs Corp: Ignored, Beaten-Down Pot Stock Could Soar 300%

Item 9 Labs Stock’s Outlook Is Bullish

Investors searching for an overlooked, beaten-down marijuana stock with amazing potential may want to consider Item 9 Labs Corp (OTCMKTS:INLB).

INLB stock might be down by 68% year-over-year, but it has excellent potential, with analysts looking for it to rally by 292% over the next 12 months to $4.00 per share.

Why the bullishness about Item 9 Labs stock?

It has a lot going for it. The Phoenix, AZ-based company reported record fiscal 2021 results, it’s expanding its cultivation and lab site, and it reported high first-quarter 2022 revenue growth.

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Item 9 Labs Corp expects that momentum to continue throughout 2022. The company has also noted that, in November 2020, Arizona passed recreational marijuana legislation, expanding Item 9 Labs’ market opportunity from $500.0 million in 2019 to $2.0 billion by 2024.

In addition to selling many of the top-selling cannabis products in Arizona, Item 9 Labs Corp is the only marijuana company in the U.S. that offers national franchise opportunities. This gives entrepreneurs one of the safest routes to enter the lucrative cannabis industry.

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About INLB Stock

Item 9 Labs Corp is a vertically integrated cannabis operator and dispensary franchisor. The company’s products include cannabis flower, vape cartridges, and concentrates.

The company’s products aren’t just popular; they’re the No. 1 brand in 60% of Arizona’s cannabis dispensaries. They’re so popular that the company is knee-deep in expanding its cultivation footprint. (Source: “Company Overview: October 2021,” Item 9 Labs Corp, last accessed February 24, 2022.)

What really sets Item 9 Labs apart from the competition is its unique dispensary franchise model through its national “Unity Rd.” brand. As mentioned earlier, Item 9 Labs Corp is the only cannabis company in the U.S. with a nationwide franchise system.

With Unity Rd., franchise owners get a branded turnkey store and are able to leverage the knowledge, resources, products, and ongoing support of Item 9 Labs. The company currently has franchise agreements and operations in Colorado, Illinois, Massachusetts, New Jersey, New York, Ohio, and West Virginia.

Item 9 Labs Corp is also targeting near-term expansion in Arizona, Georgia, Maine, Michigan, Mississippi, Montana, Oklahoma, and South Dakota. Other states will be on the company’s radar as more and more of them prepare to legalize medical and recreational cannabis.

Expansion of Cultivation Facility

In November 2021, Item 9 Labs broke ground on the master site expansion of its Coolidge, AZ cultivation and lab property. The company has been developing its cannabis from the same five-acre, 19,200-square-foot facility since 2017, and it has outgrown that site. (Source: “Item 9 Labs Corp. Breaks Ground on $13.5M Cultivation Expansion,” Item 9 Labs Corp, November 16, 2021.)

As part of the expansion, the company recently acquired the neighboring 45 acres. Item 9 Labs Corp expects to increase its floor plan to 640,000+ square feet, a 3,100% increase from its current operations.

At 50 acres, the site is one of the largest properties in Arizona that’s zoned to grow and cultivate marijuana flower.

The initial development phase is estimated to be completed this summer. This phase includes adding 9,600 square feet for indoor cultivation, 9,600 square feet of lab and packaging facilities, and a 9,600-square-foot head house to support the addition of two 18,000-square-foot greenhouses.

With this initial expansion phase, Item 9 Labs Corp expects to increase its output of cannabis plant material by 250%–300%, with a per-unit cost reduction of at least 30%.

The entire project should be completed over the next few years.

Strong Q1 Revenue Growth

For the first quarter of fiscal 2022 (ended December 31, 2021), Item 9 Labs announced that its revenue increased by 104% year-over-year to $6.2 million. (Source: “Item 9 Labs Corp. Announces First Quarter FY 2022 Financial Results With Revenue Growth of 104% to $6.2 Million,” Item 9 Labs Corp, February 15, 2022.)

The company’s gross profit in the first quarter of fiscal 2022 was $2.4 million, a 68% increase from $1.4 million in the first quarter of fiscal 2021.

Item 9 Labs Corp reported a first-quarter 2022 operating loss of $2.1 million, compared to an operating loss of $400,000 in the same prior-year period. The company reported a first-quarter 2022 net loss of $3.3 million, or $0.04 per share, up from a first-quarter 2021 net loss of $1.1 million, or $0.02 per share.

Item 9 Labs Corp had an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss of $1.2 million in the first quarter of 2022, versus an adjusted EBITDA profit of $400,000 in the first quarter of 2021.

“Demand remains strong for Item 9 Labs in Arizona, and we anticipate it will only accelerate more,” said Andrew Bowden, Item 9 Labs Corp’s CEO. (Source: Ibid.)

“Our elevated mainstream brand is currently in more than 50% of the state’s dispensaries and we anticipate expansion into new markets in the year ahead through partnerships and acquisitions to bring our award-winning products to Unity Rd. shops nationwide.”

Analyst Take

Item 9 Labs Corp is an overlooked pot company that’s uniquely positioned to capture a growing portion of the U.S. marijuana market. In addition to selling award-winning products, the company has the only national cannabis franchise business in the U.S.

The company continues to report triple-digit revenue growth, but it’s sacrificing near-term profitability to strengthen its business. That should ultimately accelerate the company’s revenue growth and profitability, as well as boost the value of Item 9 Labs stock.