Fire & Flower Holdings Corp: New Project Could Help $0.55 Pot Stock Double Again

Fire & Flower Holdings Corp Up 236% Since March

Fire & Flower Holdings Corp (OTCMKTS:FFLWF, TSE:FAF) has been one of the best-performing pot stocks since the recent pandemic-fueled sell-off. Since March, FFLWF stock has soared about 236%.

Yes, a rising tide lifts all boats, but Fire & Flower stock’s strong gains are justified. The company reported solid first-quarter results, with revenue up, improved operational performance, and a strengthened balance sheet.

Fire & Flower also recently announced the opening of two cannabis retail stores as part of its retail partnership with Alimentation Couche-Tard (OTCMKTS:ANCUF, TSE:ATD.A, TSE:ATD.B).

FFLWF Stock Overview

Fire & Flower, which is based in Edmonton, Alberta, Canada, is well on its way to becoming a leading global cannabis retailer.

The company currently has 51 retail stores across Canada—in Alberta, Manitoba, Ontario, Saskatchewan, and Yukon. (Source: “Investor Presentation, June 17, 2020” Fire & Flower Holdings Corp, last accessed June 17, 2020.)

FFLWF is just getting started though. The company also intends to enter the British Columbia market once final licensing is complete, and other Canadian markets as regulations permit.

By the end of fiscal 2020 (ended February 1, 2021), the number of its dispensaries is projected to hit 78, and by the end of fiscal 2021, it’s projected to hit 118. That would make the company the owner of the largest network of legal cannabis dispensaries in Canada.

Fire & Flower also owns Hifyre, a digital retail and analytics platform. It uses the information it collects to enhance customer experience. Since launching in September 2019, the Hifyre program has enrolled more than 100,000 customers.

Chart courtesy of StockCharts.com

Fire & Flower stock has made significant gains since hitting a bottom of $0.19 in mid-March. While FFLWF stock is up about 236% since then, it still needs to climb about 100% just to get to where it was trading in July 2019, when the company announced a strategic investment by Alimentation Couche-Tard.

Pilot Program With Alimentation Couche-Tard

On July 6, Fire & Flower announced its first endeavor with Canada-based retail company Alimentation Couche-Tard.

As part of a pilot project, Fire & Flower opened the first two cannabis retail operations adjacent to “Circle K” convenience stores in Calgary and Grand Prairie, Alberta. (Source: “Fire & Flower Launches Pilot with Alimentation Couche-Tard Through Circle K Co-Located Stores,” Fire & Flower Holdings Corp, last accessed July 10, 2020.)

Fire & Flower expects to benefit from the high traffic at the two Circle K stores. These two cannabis retail stores are expected to be the first of many additional co-location opportunities

Back in July 2019, Fire & Flower had announced that it entered into a strategic $26.0-million investment with Alimentation Couche-Tard, giving the convenience store giant a 9.9% stake in the pot company, with options to increase its stake to 50.1%. (Source: “Alimentation Couche-tard Announces A Strategic Investment In Fire & Flower, A Leading Cannabis Retailer,” Cision, July 24, 2019.)

Couche-Tard has a massive network of convenience stores, spanning approximately 10,000 locations across North America and totaling more than 16,000 stores worldwide.

The company operates its convenience stores under various names, including Circle K, “Corner Store,” “Couche-Tard,” “Holiday,” and “Kangaroo Express.” (Source: “Our Brands,”Alimentation Couche-Tard, last accessed July 10, 2020.)

Trevor Fencott, CEO of Fire & Flower, said the two companies have identified a significant number of Alimentation Couche-Tard convenience store locations across Canada at which to expand the pilot project.

Fencott didn’t say how many marijuana stores the company planned to co-locate with Circle K stores, but Fire & Flower has been exploring options in Ontario and Saskatchewan.

Strong First-Quarter Results

On June 16, Fire & Flower Holdings Corp announced that its revenue for the first quarter of fiscal 2020, ended May 2, 2020, increased 142% year-over-year to $23.1 million. (Source: “Fire & Flower Announces First Quarter 2020 Financial Results,” Fire & Flower Holdings Corp, June 16, 2020.)

Total gross profit for the first quarter was $7.5 million, or 32.6% of revenue, up from $2.7 million, or 35.1% of revenue, in the first quarter of fiscal 2019.

Fire & Flower reported a first-quarter net loss of $12.7 million, or $0.08 per share. In the first quarter of 2019, the company reported a net loss of $17.1 million, or $0.17 per share. (Source: “Fire & Flower Announces First Quarter 2019 Financial and Operational Results,”  Fire & Flower Holdings Corp, June 26, 2019.)

Fencott noted,

Fire & Flower’s financial and operational results for the first quarter, fiscal 2020 demonstrate that the company continues to show positive growth quarter over quarter and over its previous fiscal year. We will continue to work towards positive operating [earnings before interest, taxes, depreciation, and amortization] delivered through four-wall retail economics.

(Source: Fire & Flower Holdings Corp, June 16, 2020, op. cit.)

Analyst Take

Fire & Flower Holdings Corp is one of the more compelling pot stocks to watch over the coming years. It has been reporting strong revenue growth, improved operational performance, and a strengthened balance sheet. The company is opening new retail locations and acquiring others.

What’s really setting FFLW apart from its competitors right now is its partnership with convenience store giant Alimentation Couche-Tard. The recently-launched pilot program shows that both companies are strategically aligned. It also positions Fire & Flower to capitalize on both domestic and international opportunities.