4Front Ventures Corp: U.S. Pot Stock Could Double in 2021

4Front Ventures Stock Climbs Based on Strong Financials

4Front Ventures Corp (CNSX:FFNT, OTCMKTS:FFNTF) is an overlooked U.S. pot company that has been having a great year. FFNTF stock is up 222% year-over-year, 108% over the last six months, and 53% year-to-date.  

Despite having a market cap of $1.0 billion, 4Front Ventures is relatively unknown. In fact, 4Front Ventures stock is a true penny stock, trading at just $1.40 per share. But that should change over the coming quarters.

The multistate operator recently reported strong fourth-quarter and full-year results, secured land and funding to build a massive new cultivation and production facility, and began construction on a dispensary in Massachusetts.

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FFNTF Stock Overview

4Front is a cannabis company operating in five of the most prominent, populous states in the U.S: California, Washington, Illinois, Michigan, and Massachusetts.

Together, these five states represent an addressable market of 76 million people, or 23% of the total addressable market. (Source: “Investor Presentation: April 2021,” 4Front Ventures Corp, last accessed May 12, 2021.)

The company operates in the tetrahydrocannabinol (THC) and cannabidiol (CBD) sectors. The company produces more than 25 recreational marijuana brands of flower, edibles, tinctures, concentrates, and topicals. It has approximately 2,800 stock-keeping units (SKUs).

Over the last six years, 4Front Ventures Corp has been creating a dominant position in the State of Washington, one of the most competitive and low-priced marijuana markets in the country. As of this writing, 260 retail locations carry its product line.

4Front is the No. 1 cannabis edible manufacturer and No. 2 producer of marijuana flower in the state, giving it the No. 2 overall share of the Washington marijuana market.

The company’s objective is to replicate its success as one of the most efficient and profitable cannabis operators in Washington in the targeted states of Massachusetts, Illinois, Michigan, and California.

In Illinois, 4Front Ventures Corp has been finalizing plans to expand its cultivation and production with an additional 210,000-square-foot facility. Production at its Elk Grove cultivation facility tripled to 9,072 square feet. Moreover, it operates two dispensaries in the state (in Chicago and Calumet City).

The company serves the medical and recreational cannabis market in Massachusetts through two dispensaries. A third is expected to open in the second quarter of 2021. 4Front’s cultivation and production facility in the state covers 70,000 square feet and generates a yield of up to 404 grams (0.9 pounds) per square foot.

In Michigan, 4Front Ventures Corp is the longest continually operating legal cannabis retailer east of the Mississippi. Its 5,300-square-foot dispensary is located in the heart of Ann Arbor, half a mile from the University of Michigan.

California is the largest legal medical and recreational cannabis market in the U.S. Construction on 4Front’s fully funded 185,000-square-foot manufacturing and production facility in the state is underway and should be completed in the second quarter of 2021.

Strong Q4 & Full-Year Results

For its fourth quarter ended December 31, 2020, 4Front announced that its systemwide total pro forma revenue increased 12% quarter-over-quarter to $25.0 million. (Source: “4Front Announces Fourth Quarter and Fiscal Year 2020 Results and Provides Business Update,” 4Front Ventures Corp, April 6, 2021.)

The company reported continued strong growth across the board, coupled with the first full quarter of recreational marijuana sales in Massachusetts and the opening of its second retail location in Illinois.

The company’s fourth-quarter adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) increased 59% quarter-over-quarter to $5.9 million, representing an adjusted EBITDA margin of 24%. The company reported positive operating cash flow of $3.2 million.

4Front Ventures Corp’s full-year total pro forma revenue was $88.1 million. Its total revenue was up 203% year-over-year at $57.6 million. Its adjusted EBITDA for the year was $5.9 million.

Leo Gontmakher, CEO, commented, “4Front’s strong fiscal 2020 performance is validation that our core strategy of replicating low-cost production methods, developed and refined within our Washington facilities, combined with our steadfast focus on execution is working.”

He added, “We ended 2020 with tremendous business momentum that we have carried into the new year, as we scaled and replicated our operations across the growing adult-use markets of Massachusetts, Illinois and California.” (Source: Ibid.)

Business Outlook

4Front Ventures Corp reiterated its previously announced full-year 2021 guidance and estimates of systemwide pro forma revenue of $170.0 to $180.0 million and adjusted EBITDA of $40.0 to $50.0 million. 

Even those numbers are small compared to what 4Front expects to achieve long-term. The company’s existing licensed projects, at maturity, represent a long-term revenue and EBITDA opportunity upwards of $650.0 and $250.0 million, respectively.

Analyst Take

4Front Ventures Corp is a great, overlooked multistate cannabis operator that has a massive footprint in Washington. It has taken its successful strategy to also make strong inroads in California, Massachusetts, Michigan, and Illinois.

This helped the company report strong financial results for 2020 and reiterate its aggressive guidance for 2021. That bodes well for 4Front Ventures stock.