Jushi Holdings Inc: Undervalued U.S. Pot Stock Expected to Double

Jushi Holdings Inc Has Strong Start to 2021

Jushi Holdings Inc (CNSX:JUSH, OTCMKTS:JUSHF) is a multistate cannabis stock that continues to trade under the radar, despite the company reporting excellent financial results and announcing a raft of strategic acquisitions.

That doesn’t mean Jushi stock hasn’t rewarded savvy investors. JUSHF stock is up 481% year-over-year and 72% over the last six months. Despite these massive gains, Jushi stock is just getting started—at least according to Wall Street.

Of the seven analysts providing a 12-month price forecast for JUSHF stock, their median target is $10.00, which points to 72% growth from its current level. The high estimate of $11.59 suggests that Jushi stock could double over the next year.

Why the bullishness?

Advertisement

Jushi Holdings Inc has been reporting great financial results. In 2020, the company’s revenue soared by 690% year-over-year to $80.8 million, while its gross profit increased by 760% to $41.5 million. It also reduced its loss from operations to $10.5 million, from a 2019 loss from operations of $34.2 million.

In the first quarter, the company delivered a substantial increase in both revenue and gross profit. It also reported positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for the third quarter in a row.

JUSHF Stock Overview

Jushi Holdings is a multistate owner and operator of cannabis cultivation, processing, and retail licenses. Its core markets are Virginia, Pennsylvania, Illinois, and Massachusetts. Its developing markets are Ohio, Nevada, and California. (Source: “About,” May 2021,” Jushi Holdings Inc, last accessed June 3, 2021.)

As of this writing, Jushi Holdings Inc’s operations include 18 retail locations under the “BEYOND / HELLO” brand. The company plans to open 16 more. It also operates five cultivation facilities and five extraction and processing facilities.

The company’s brand portfolio includes “The Bank,” “The Lab,” “Nira,” “Nira Medicinals,” Seche,” and “Tasteology.”

Acquisition of Nature’s Remedy

In April, Jushi Holdings announced plans to acquire Nature’s Remedy of Massachusetts, Inc., a vertically integrated single-state cannabis operator, for total consideration of up to $110.0 million. (Source: “Jushi Holdings Inc. to Expand Footprint Through Acquisition of Vertically Integrated Massachusetts Operator,” Jushi Holdings Inc, April 19, 2021.)

Nature’s Remedy currently operates two retail dispensaries, one in Millbury, MA and the other in Tyngsborough, MA. It also has a 50,000-square-foot cultivation and production facility in Lakeville, MA with approximately 19,500 square feet of indoor marijuana flower canopy, as well as extraction and manufacturing capabilities.

Nature’s Remedy expects to expand its marijuana flower canopy to approximately 31,000 square feet during the second half of 2021.

The current marijuana flower production at the Lakeville Facility is approximately 6,800 pounds per year. With the expected expansion, Nature’s Remedy could increase that to approximately 11,000 pounds per year.

Nature’s Remedy is evaluating further expansion opportunities in the existing Lakeville industrial complex and/or on 10 acres of land owned by Nature’s Remedy in Grafton, MA. The land in Grafton could potentially accommodate a new 35,000 to 40,000-square-foot facility, with approximately 18,000 square feet of marijuana flower canopy.

Acquisition of Dalitso LLC Facility

In May, Jushi Holdings closed on its previously announced acquisition of a 93,000-square-foot facility operated by its wholly owned subsidiary and Virginia-based pharmaceutical processor, Dalitso LLC. (Source: “Jushi Holdings Inc. Closes Acquisition of Dalitso LLC Facility and Land in Prince William County, VA,” Jushi Holdings Inc, May 5, 201.)

The acquisition also includes approximately nine acres of surrounding land in Prince William County, VA. The total cost of the acquisitions was approximately $22.0 million.

Dalitso is one of only five applicants to have received conditional approval for a pharmaceutical processor permit issued by the Virginia Board of Pharmacy and one of only four applicants to have received final approval and permit issuance.

The permit allows Dalitso LLC to cultivate, process, dispense, and deliver medical cannabis to registered patients in Virginia.

The designated area for Dalitso to operate is in Northern Virginia, which includes two of the state’s most densely populated counties, Fairfax and Prince William. The area has a population of approximately 2.5 million people, which is nearly 30% of the state’s total population.

Great Q1 Financial Results

Jushi announced that its revenue for the first quarter of 2021 (ended March 31) increased by 29% sequentially to $41.7 million. Its first-quarter 2021 gross profit was $20.1 million (48.2% of revenue), compared to $17.6 million (54.5% of revenue) in the fourth quarter of 2020. (Source: “Jushi Holdings Inc. Reports First Quarter 2021 Financial Results and Delay in Filing of Annual and 2021 Q1 Filings,” Jushi Holdings Inc, May 28, 2021.)

The company reported a first-quarter net loss of $26.1 million, or a $0.17 loss per share. In the fourth quarter of 2020, Jushi reported a net loss of $148.1 million. The improvement in the first-quarter net loss was a result of fluctuations in the fair value of derivative liabilities coming from changes in the pricing of the firm’s common shares and the volume of warrant liabilities.

Jushi Holdings Inc’s adjusted EBITDA in the first quarter were $3.0 million, versus $2.0 million in the fourth quarter of 2020.

The company also solidified its balance sheet through two successful equity transactions, which resulted in gross proceeds of approximately $86.0 million.

Jushi ended the first quarter with $167.9 million in cash and short-term investments. It also had $82.4 million in principal total debt.

Moreover, during the first quarter of 2021, Jushi Holdings Inc:

  • Closed its aforementioned acquisition of a facility and land operated by Dalitso LLC
  • Acquired 100% of the equity of Organic Solutions of the Desert, LLC, a dispensary in Palm Springs, CA, and approximately 78% of the equity of a retail license holder in Grover Beach, CA, with the rights to acquire the remaining equity
  • Signed a definitive agreement to acquire Nature’s Remedy
  • Completed a previously announced acquisition of an established Nevada operator
  • Commenced the first phase of its previously announced expansion project at its Pennsylvania grower-processor facility

Analyst Take

Jushi Holdings Inc is a great integrated cannabis company that is building out its multistate portfolio of branded cannabis-derived assets.

It has a solid balance sheet, has been reporting strong revenue and gross profit growth, and reported positive adjusted EBITDA for the third consecutive quarter.

Looking ahead to the remainder of 2021, the company is focused on three areas of growth: opening new retail locations, expanding its grower-processor assets in Pennsylvania and Virginia, and pursuing additional merger and acquisition opportunities.