MedMen Enterprises Inc: Iconic Pot Retailer Trades at $0.39 per Share

Will This Pot Stock Make a Turnaround?

To marijuana enthusiasts, the “MedMen” brand should be familiar. The company—MedMen Enterprises Inc (CNSX:MMEN, OTCMKTS:MMNFF)—has a portfolio of some of the most iconic legal cannabis retail stores in the U.S., including locations in Beverly Hills, Venice Beach, downtown L.A., and New York’s Fifth Avenue.

But the journey of MedMen stock has not exactly been sunshine and rainbows. After peaking in late 2018, the company’s share price went on a downtrend and is now at just $0.39.

MedMen reported earnings on February 16. The report showed that, in the second quarter of the company’s fiscal year 2021, which ended December 26, 2020, it generated $33.8 million of revenue. That represented a 0.3% increase quarter-over-quarter, excluding the divestiture of its Evanston store. (Source: “MedMen Reports Second Quarter Fiscal Year 2021 Financial Results,” MedMen Enterprises Inc, February 16, 2021.)

On a year-over-year comparison, things look less rosy, as the company earned $44.1 million of net revenue in the second quarter of its fiscal 2020.

The big challenge for MedMen—and one of the main reasons MMNFF stock tanked earlier on—was that the company’s costs seemed to be getting out of control. More recently, though, MedMen has made some solid progress on that front.

For the second quarter of fiscal 2021, MedMen Enterprises Inc’s company-wide gross margin rate was 53%, marking a substantial increase from the 47% in the first fiscal quarter. At the same time, the company’s general and administrative expenses totaled $33.8 million, down 47% from the same period of the previous year.

However, the progress was not enough, as the company still incurred a substantial net loss of $68.9 million for the quarter, which included $24.0 million of tax provision expense.

That said, in the year-ago period, MedMen had a much bigger net loss of $93.2 million, and that number included a tax provision benefit of $14.6 million.

So things seem to be going in the right direction.

In fact, the company has traveled a long way since entering a restructuring mode in 2019. Since the second quarter of its fiscal 2020, MedMen has reduced its overall corporate overhead by more than 65% and has achieved annualized savings in corporate selling, general, and administrative (SG&A) expenses of about $70.0 million. Source: “Corporate Presentation: February 2021,” MedMen Enterprises Inc, last accessed March 19, 2021.)

Don’t forget, the company still has a solid presence in the cannabis retail industry. MedMen currently has 23 operational stores diversified across California, Florida, Illinois, Nevada, and New York. Moreover, it has three additional retail licenses in California, two in Massachusetts, and one in Illinois. There’s also no cap on marijuana retail stores in Florida.

Given that the U.S. cannabis market is expected to expand rapidly for years to come, MedMen’s operational stores and extra retail licenses could lead to growth for the company.

MedMen Enterprises Inc (OTCMKTS:MMNFF) Stock Chart

Chart courtesy of StockCharts.com

Analyst Take

As the above chart shows, the recent path of MedMen stock looks nothing short of a roller-coaster ride. The stock was in a trading range between $0.12 and $0.20 per share toward the end of 2020. It shot up in early February 2021, reaching an intra-day high of $1.47 on February 10 before coming back down.

At this point, it’s hard to say how the turnaround story will unfold for MedMen Enterprises Inc. But all things considered, MMNFF stock still deserves a spot on pot stock investors’ watch lists.