Planet 13 Holdings Inc: A Unique Pot Stock with Strong Potential

pot stockWhy This Pot Stock Looks Interesting

As the cannabis industry enters the main stage, there are now different types of pot stocks trading in the market. From cultivators and processors to retailers and white-label product manufacturers, investors have a wide range of publicly listed pot stocks to choose from.

Today’s focus is on Planet 13 Holdings Inc (OCTMKTS:PLNHF, CNSX:PLTH), which, for the most part, is known for its retail store.

The company operates the Planet 13 Cannabis Entertainment Complex, which is located just steps away from the Las Vegas Strip.

Las Vegas has a reputation as the entertainment capital of the world. Nevada is also a legal cannabis state, with sales of recreational cannabis launching on July 1, 2017.

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Planet 13’s store, which was opened on November 1, 2018, is just minutes away from every resort and casino on the Strip. Other than its strategic position, the complex is famous due to its sheer size. In fact, with a whopping 112,000 square feet, Planet 13’s Cannabis Entertainment Complex is not just the largest cannabis store in Nevada or even the U.S., but also in the entire world.

Of course, compared to companies that operate chains of cannabis dispensaries, Planet 13’s single facility may not seem like much. However, that one facility has allowed the company to build a solid position in Nevada’s cannabis industry.

To give you an idea, Planet 13’s Cannabis Entertainment Complex received more than one million visitors in 2019, brought in approximately $63.0 million in revenue for the year, and was responsible for around nine percent of total cannabis sales in the state of Nevada. (Source: “Corporate Presentation September 2020,” Planet 13 Holdings Inc, last accessed October 5, 2020.)

And that was just a start. In August, the company announced that, as part of a settlement, it received a provisional adult-use dispensary license in unincorporated Clark County, Nevada. (Source: “Planet 13 Awarded Nevada Dispensary License,” Planet 13 Holdings Inc, August 10, 2020.)

The neat thing is, rather than building a new dispensary from scratch, Planet 13 decided to use the license to reopen its former dispensary on Sunset Road in Las Vegas, which closed in October 2018 (the reason for the closure was to transfer the license to the company’s giant superstore near the Las Vegas Strip).

The former dispensary earned $4.9 million in revenue with a gross margin of 53% during its last full quarter of operations in 2018. And because the Sunset Road dispensary is already in place, the reopening—expected to happen soon—doesn’t require additional capital expenditures from the company.

At the same time, due to the acquisition of Newtonian Principles Inc earlier this year, Planet 13 got hold of a California cannabis sales license and a 30-year lease for a dispensary in Santa Ana, California. The company plans to launch its first retail location in the Golden State in the first half of 2021. (Source: “Planet 13 Announces Acquisition of California Dispensary License and Close of Santa Ana Acquisition,” Planet 13 Holdings Inc, May 21, 2020.)

And that’s not all. Other than being a force to be reckoned with in the Nevada cannabis retail business, Planet 13 also has its own brands and wholesale operations. In particular, the company has three cultivation facilities and three production facilities and is producing multiple top-selling SKUs in the state.

Planet’s 13’s “HaHa Gummies” had three of the 10 highest selling edibles SKUs in Nevada in the second quarter of 2020, while its “Elysium” was the fourth highest selling beverage SKU. (Source: “Planet 13 Provides Updated Owned Brands Operating Performance,” Planet 13 Holdings Inc, July 13, 2020.)

Of course, like a lot of retailers, Planet 13’s business was impacted by the COVID-19 pandemic. In the second quarter of 2020, the company generated $10.8 million in revenue, which marked a sizable 34.9% decline year-over-year. (Source: “Planet 13 Announces Second Quarter 2020 Financial Results,” Planet 13 Holdings Inc, August 31, 2020.)

However, since the second quarter ended, things have improved quite a bit. While the company has yet to report third-quarter results, the numbers in July and August look quite promising.

In a conference call, Planet 13’s co-chairman and co-chief executive officer Larry Scheffler said, “As Nevada and Las Vegas has started to reopen we quickly regained lost ground and now actually generating higher revenue than ever before. In July, we generated $7.3 million, our highest month ever and we’re on-track to exceed that number in August with $7.8 million through 30 days.” (Source: “Planet 13 Holdings Inc. (PLNHF) Management on Q2 2020 Results – Earnings Call Transcript,” Seeking Alpha, August 31, 2020.)

In other words, less than two months into the third quarter, Planet 13 has already earned $15.1 million in revenue, which is substantially more than what it generated in the entire second quarter.

Planet 13 Holdings Inc (OTCMKTS:PLNHF) Stock Chart

Chart courtesy of StockCharts.com

Analyst Take

As you can see from the chart, investors have started noticing Planet 13 stock. Year to date, PLNHF is up more than 45%.

Even though the company’s business took a hit in the second quarter, it is making a strong comeback. And with an expanding footprint, Planet 13 could become one of the hottest pot stocks in the years ahead.