Jushi Stock Aims to Dominate U.S. Pot Market
The move by more states to legalize medical and/or recreational cannabis makes a whole lot of sense. One reason is that it will generate enormous amounts of tax dollars for the state governments.
On the small-cap end of the cannabis market, I like the risk/reward opportunity in Jushi Holdings Inc (CNSX:JUSH, OTCMKTS:JUSHF).
The company is a rapidly growing, vertically integrated, cannabis and hemp operator focused on the U.S. market. Jushi operates in Pennsylvania, Virginia, Illinois, and California. It also has plans to set up in Ohio and Nevada.
JUSHF stock has easily outperformed the ETFMG Alternative Harvest ETF (NYSE:MJ) over the past year, surging by 480%, versus 56% move by the ETF. But Jushi stock has been lagging this year, up by a mere two percent in 2021, compared to the 51% gain by the ETFMG Alternative Harvest ETF.
Chart courtesy of StockCharts.com
Down by 34% from its high of $9.06 in February during the “Reddit”-driven surge buying, I like the current entry point for JUSHF stock as the company begins to ramp up its revenues and it aggressively expands.
Revenues Set to Surge as Pot Demand Accelerates
Jushi Holdings Inc has limited financial history, but so far, the results have been impressive. Its revenues surged by 494% from $13.6 million in 2019 to $80.8 million in 2020.
The company’s outlook is even better. Jushi Holdings is expected to drive its revenues up by 181.8% to $227.6 million this year, followed by 84.8% to $420.5 million in 2022. (Source: “Jushi Holdings Inc. (JUSHF),” Yahoo! Finance, last accessed June 4, 2021.)
These are spectacular revenue numbers if they pan out.
Jushi Holdings trades at an attractive 1.6 times its consensus 2022 revenue estimate.
Moreover, there’s a chance that the company can turn profitable on an adjusted basis this year. The consensus estimate calls for Jushi Holdings to report an adjusted loss of $0.02 per diluted share in 2021. (Source: Yahoo! Finance, op. cit.)
There’s a high estimate of profits of $0.05 per diluted share for 2021, but if that doesn’t materialize in 2021, Jushi Holdings Inc is slated to earn $0.46 per diluted share in 2022.
That implies an attractive forward price-to-earnings multiple of 13 times the consensus estimate and eight times the high estimate.
I like the positive tailwinds for medical and recreational cannabis in the U.S., and I believe that Jushi Holdings Inc is ideally situated to benefit from those tailwinds.
Jushi stock is worth considering at its current level. The company’s bullish outlook and attractive valuation bode well.
If the company can deliver anything close to its estimates, I would expect to see JUSHF stock trade at much higher prices on the horizon.