Planet 13 Holdings Inc: U.S. Pot Stock Down 32% But Recently Reported “Stellar” Q3

Planet 13 Holdings Inc Takes Massive Steps for Growth

On the campaign trail, the Democrats said they were the party to get recreational cannabis legalized at the federal level. That hasn’t happened. In fact, inactivity by the Democrats, who essentially have control of Washington, D.C., has led impatient investors to send marijuana stocks reeling.

Some pot stocks deserve the drubbing, but others, like Planet 13 Holdings Inc (CNSX:PLTH, OTCMKTS:PLNHF), do not. The owner and operator of the two largest cannabis dispensaries on Earth, Planet 13 has been firing on all cylinders and has been taking massive steps to secure future growth.

The company has been reporting exceptional financial results all year. Planet 13 Holdings Inc also recently opened a “SuperStore” in California and won licenses to do the same in Chicago and Florida.

How have investors rewarded this progress? They’ve given Planet 13 stock a beating in 2021. As of this writing, PLNHF stock is:

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  • Down 42% over the last six months
  • Down 35% year-to-date
  • Down 18% year-over-year

While a rising tide lifts all boats, a falling tide sinks all ships. The only so-called crime this company has committed is that it’s part of the (legal) cannabis industry.

On the other hand, the 35% year-over-year drop has put Planet 13 stock in a better trading range. At $3.75 per share, it’s trading at a tested support level.

Chart courtesy of StockCharts.com

There are many reasons to be bullish on marijuana stocks, including PLNHF stock.

A whopping 68% of Americans believe that marijuana should be legal. Meanwhile, the percentage of U.S. adults who oppose legalizing cannabis has cratered from 52% in 2010 to eight percent in 2021. (Source: “Americans Overwhelmingly Say Marijuana Should Be Legal for Recreational or Medical Use,” Pew Research Center, April 16, 2021.)

Another reason to get behind pot companies like Planet 13 Holdings Inc is that Republicans are working on a bill to federally legalize recreational cannabis.

The as-of-yet unveiled—but widely leaked—States Reform Act seeks to reschedule marijuana from the federal list of controlled substances. (Source: “A Leak Reveals a Republican-Led Bill to Federally Legalize and Tax Marijuana,” Forbes, November 9, 2021.)

The Republican-led bill is similar to the Democratic bill Marijuana Opportunity Reinvestment and Expungement Act (MORE Act), in that both bills would end the criminalization of cannabis. The Republican bill, however, proposes an excise tax on cannabis of 3.75%, compared to the five percent tax rate the Democrats are proposing (which would later increase to eight percent).

Marijuana legalization at the federal level could increase demand for cannabis and be a boon for pot stocks like Planet 13 stock.

About PLNHF Stock

As mentioned earlier, Planet 13 Holdings Inc owns and operates the two largest cannabis dispensaries on the planet.

The company’s Las Vegas SuperStore, which is the closest marijuana dispensary to the Las Vegas strip, covers 112,000 square feet. Each year, more than one million people visit that SuperStore, giving it a nine-percent take of the total cannabis sales in Nevada. (Source: “Corporate Presentation: November 2021,” Planet 13 Holdings Inc, last accessed December 2, 2021.)

Things are going so well at Planet 13’s Las Vegas SuperStore that it recently doubled the floor square footage and cash registers. Management said the expansion was “absolutely critical,” especially for weekends, when wait times are sometimes over an hour.

Planet 13 Holdings Inc also operates the “Medizin” dispensary in Las Vegas, which is smaller than the SuperStore but offers the same kind of experience.

The company also has three marijuana cultivation and production facilities in Nevada.

Moreover, the company’s own product brands have been performing well, with “Trendi” vapes seeing 110% year-over-year sales growth and accounting for about five percent of the vape sales and seven percent of the concentrate sales in Nevada. (Source: “Planet 13 Announces Q3 2021 Financial Results,” Planet 13 Holdings Inc, November 23, 2021.)

The company’s “HaHa” edibles account for roughly 14% of the edibles sales in the state.

In July, Planet 13 Holdings Inc entered the California market with the opening of its Orange County SuperStore. Strategically located close to Disneyland, South Coast Plaza, Knott’s Berry Farm, and beaches, phase one is now operational.

The Orange County SuperStore is expected to cover 55,000 square feet (about the size of a football field) once phase 3 is complete. This will make it the largest dispensary in the most developed cannabis market in the country.

In August, Planet 13 announced that it won a Conditional Adult Use Dispensing Organization License in the Chicago-Naperville-Elgin region. The company is looking at building a SuperStore there.

In October, Planet 13 Holdings Inc completed the acquisition of a Florida cannabis license for $55.0 million. The company will initially start its build-out by developing a network of neighborhood stores, similar to its Medizin dispensary.

As Florida gets closer to legalizing recreational marijuana, Planet 13 Holdings Inc will start building SuperStores in high-traffic tourist destinations throughout the state.

The company’s long-term objectives are aggressive. Over the next five years, Planet 13 hopes to have at least eight SuperStores in tier-one markets across the U.S. and Canada, plus smaller stores strategically located across the U.S.

Another Quarter of Excellent Results

After a slower January and February, which was related to COVID-19 restrictions, Planet 13 Holdings Inc has been reporting stellar financial results.

In the third quarter of 2021, the company’s revenue jumped by 45% year-over-year to $33.0 million. Its gross profit before biological adjustments was $17.6 million, or 53.5%, compared to $13.0 million, or 56.9%, in the third quarter of 2020. (Source: Ibid.)

Planet 13 Holdings Inc reported a third-quarter 2021 net loss of $10.2 million, or $0.04 per share, compared to third-quarter 2020 net income of $200,000, or breakeven per share.

The company’s adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) were $3.6 million, versus $6.4 million in the same prior-year period.

Planet 13 Holdings Inc ended the third quarter with $73.7 million in cash, down from $79.0 million at the end of the same quarter last year. Its total assets were $220.5 million, compared to $150.0 million in the third quarter of 2020. The company’s total liabilities inched up year-over-year from $29.3 to $35.4 million.

Analyst Take

U.S. pot stocks have been taking a hit, but that just puts fabulous stocks like Planet 13 stock in a better trading range.

While 2021 has been a disappointing year for PLNHF stockholders, I don’t think the same will hold true in 2022. Planet 13 Holdings Inc continues to report strong financial results, it has a rock-solid balance sheet, it’s expanding its business footprint, and it has taken steps to secure both near-term and long-term financial growth.