Fire & Flower Holdings Corp: 2020 a Transformative Year for Overlooked Pot Stock

Fire & Flower Holdings Corp: Pot Retailer Poised For Explosive GrowthFire & Flower Holdings Corp Expected To Flourish in 2020

By all accounts, 2020 and 2021 will be transformational years for Fire & Flower Holdings Corp (OTCMKTS:FFLWF, TSE:FAF).

With an interest in 38 marijuana dispensaries across Canada, Fire & Flower has the second-largest presence in the country’s legal pot sector.

But that is expected to change. By the end of fiscal 2021, the company is projected to be operating more than 130 dispensaries, making it far and away the owner of the largest network of legal cannabis dispensaries in Canada.

This past July, Fire & Flower announced that convenience store behemoth Alimentation Couche-Tard Inc (OTCMKTS:ANCUF, TSE:ATD.A, TSE:ATD.B) purchased an almost-10% stake in the cannabis company. And that could increase to 50.1%.

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That investment has helped Flower & Fire increase the number of its retail outlets, which, in turn, has helped it report strong financial results and provide a bright outlook. That’s good news for Fire & Flower stock holders.

FFLWF Stock Overview

Little-known Fire & Flower is poised to become the biggest cannabis retailer in Canada. It currently owns, or has an interest in, dispensaries in four provinces (Alberta, Saskatchewan, Manitoba, and Ontario) and the Yukon territory. (Source: “Overview,” Fire & Flower Holdings Corp, last accessed December 17, 2019.)

In its third-quarter financial report, the Edmonton, Alberta, Canada-based company said it expects to meet its goal of opening 45 stores by the end of fiscal 2019 (ended February 1, 2020).  (Source: “Fire & Flower Announces Third Quarter 2019 Financial and Operational Results,” Fire & Flower Holdings Corp, December 17, 2019.)

By the end of fiscal 2020, the number of locations is projected to hit 85, and by the end of fiscal 2021, it’s projected to reach 135.

The company also owns Hifyre, an analytics business that studies and gathers user behavioral data for the cannabis industry. It then uses that information to enhance the customer experience.

Hifyre recently launched the “Spark Perks” membership program, which provides quicker checkout, exclusive deals, and access to members-only events. Since launching in mid-September, the program has enrolled more than 50,000 people.

Thanks to predictive analytics, Spark Perks members spend 44% more per transaction than non-members, and 39% of them have made more than two transactions since the program launched.

Fire & Flower Stock Information

Market Cap $83.0 Million
52-Week High $1.50
52-Week Low $0.56
Shares Outstanding 120.3 Million
Float 98.0 Million
50-Day Moving Average $0.69
200-Day Moving Average $0.87

(Source: “Fire & Flower Holdings Corp. (FFLWF),” Yahoo! Finance, last accessed December 18, 2019.)

Strategic Investment by Alimentation Couche-Tard

On July 24, Alimentation Couche-Tard announced a strategic $26.0-million investment in Fire & Flower, giving it 9.9% ownership in the company. (Source: “Fire & Flower Announces Strategic Investment by Alimentation Couche-Tard, A Global Retailer With Over 16,000 Stores in 26 Countries, Sets Sights on Global Cannabis Market and Conditional Approval to Uplist to the Toronto Stock Exchange,” Fire & Flower Holdings Corp, July 24, 2019.)

Couch-Tard could take a controlling interest (50.1%) in Fire & Flower if all of the securities issued are converted in full. This would result in Fire & Flower obtaining more than $380.0 million of growth capital.

Alimentation Couche-Tard is a global retailer with more than 16,000 stores in 25 countries, including the United States.

Through this strategic investment, Couche-Tard is looking to become a key player in the cannabis industry.

Q3 Revenue Up 24% Sequentially

On December 17, Fire & Flower announced that its revenue for the third quarter increased 23% sequentially to $13.7 million. (Source: Fire & Flower Holdings Corp, December 17, 2019, op. cit.)

The company said it expects revenues to continue to increase as it acquires new licenses, opens additional dispensaries, and commercializes its Hifyre digital channel.

Fire & Flower reported net income of $10.2 million, or $0.07 per diluted share.

At the end of the third quarter, the company operated 30 retail dispensaries, including 10 that started operations during the quarter.

Subsequent to the end of the quarter, the company received nine additional retail store licenses and started operations at three additional dispensaries in Alberta. It is expecting to start operations at the six remaining retail stores before the end of fiscal 2019.

Fire & Flower also entered the final stages of the application process for retail licensing in British Columbia.

Analyst Take

Fire & Flower Holdings Corp continues to report record growth and meet its near-term and long-term objectives. This includes the cash infusion from Couch-Tard.

That transformative move provides Fire & Flower with an excellent opportunity for aggressive growth in massive international markets like the U.S., Mexico, and Europe. That bodes well for FFLWF stock.