MedMen Q4 Retail Sales
While everyone is eying the upcoming Canadian marijuana legalization, there is an unspoken truth sitting just beneath the surface that the United States and other major markets are the true end goals of the legal cannabis industry.
Don’t get me wrong, Canada’s legalization is going to be great for pot stocks, but ultimately, the U.S. market is the Holy Grail.
That brings us to the largest marijuana retail stock on the market, MedMen Enterprises Inc (OTCMKTS:MMNFF, CSE:MMEN).
Before I get into the MedMen stock forecast, here’s a little background on MMNFF stock.
The California-based company is one of the largest marijuana retailers in the U.S. and certainly the largest publicly traded pot stock based in the United States.
So why is this massive marijuana company with so much potential listed on the Canadian Securities Exchange (CSE) instead of on a major U.S. stock exchange—or even the more renowned Toronto Stock Exchange (TSE)?
That has to do with the company’s reverse takeover (RTO).
An RTO is when a private firm buys a publicly traded company. Rather than merge downward off the stock market, the private buyer (in this case, MedMen) takes out a controlling stake in an already publicly available stock.
MedMen’s RTO involved a company called Ladera Ventures Corp. The oversubscribed offering raised $110.0 million on a pre-money valuation of almost $1.7 billion. (Source: “MedMen, Largest U.S. Cannabis Company, Begins Trading on the Canadian Securities Exchange May 29th Under Ticker Symbol ‘MMEN’,” MedMen Enterprises Inc., May 29, 2018.)
And that’s how MedMen stock came in to being.
The company is attractive off the bat as a way for investors to gain exposure to the U.S markets. And MedMen’s recent fourth-quarter (Q4) sales figures help increase the company’s appeal.
The MedMen Q4 retail sales revenue was about $19.2 million—a good haul, considering the company’s size. (Source: “MedMen Releases Preliminary Fourth Quarter 2018 Systemwide Retail Revenue Results,” Business Wire, August 16, 2018.)
Most of that revenue came by way of the company’s booming California sales in the recreational marijuana market. Between seven retail locations alone, it raked in about $17.4 million in revenue, with an average retail markup over wholesale of 90%.
These locations brought in about 94,000 new customers and almost 130,000 returning buyers, with the average transaction netting the company $77.76.
These are very impressive numbers that go hand-in-hand with other moves by the company, like its U.S. expansion plans.
MedMen has branched out into states across the country, most notably Nevada, where it recently opened a 45,000-square-foot cultivation and manufacturing facility.
The U.S. expansion doesn’t end in the desert, however; the company is also looking to construct facilities and expand its retail footprint in New York and Florida.
“Retail is the key to the fast-evolving cannabis industry. It is where brands are built and where the margins can be maintained,” said Adam Bierman, MedMen chief executive officer and co-founder.
“The rapid revenue growth in our California stores, only six months into recreational sales, is a solid reflection of our continued execution of our business thesis. We will remain focused on our strategy and the kind of growth that generates long-term value for our shareholders.”
MedMen Stock Forecast
There’s no doubt in my mind that MMNFF stock has great potential, but the question is: “Can the company fulfill that potential?”
Chart courtesy of StockCharts.com
The MedMen Q4 retail sales were heartening, no doubt, but since the stock went public, it has seen no growth, with a bevy of ups and downs that have resulted in a net loss of about half-a-percent.
One of the main factors is that MedMen is stuck on a lesser-known stock exchange. Had it been on the TSE, I feel that its stock price would have benefited.
Being listed only on over-the-counter (OTC) markets and in Canada is already a barrier; being on the CSE makes it harder for the company to attract investors.
The MedMen stock price is also the victim of bad timing, with MMNFF stock having joined the stock markets during a correction that scorched the industry.
Still, I would have liked to have seen at least some progress from a hot new marijuana company that operates in the U.S.’s largest market—a market, mind you, that is larger than Canada’s.
With all that said, I believe that MedMen’s impressive California sales and strong U.S. expansion plans will eventually pan out for the company. As such, one has to take a long view on MedMen stock.
While all the financial numbers are encouraging, we haven’t seen the growth in MedMen’s stock price that we would like to see.
My MedMen stock forecast, therefore, has the stock likely making gains by the end of 2018, but those gains will be spotty and volatile.
I foresee a bright future for MMNFF stock on a timescale made up of years, not weeks or months.