Fire & Flower Holdings Corp: $0.91 Pot Stock With Explosive Upside Potential?

A Low-Priced Canadian Pot Stock to Think About

If you’ve been following pot stocks long enough, you’d know that chasing parabolic runs is not the safest strategy. When a stock skyrockets in a very short period, it almost always experiences pullbacks, and those pullbacks can be quite substantial.

But that doesn’t mean investors should ignore all the soaring tickers. Once a solid pot stock has retraced and consolidated after shooting through the roof, it could be building up momentum for the next big move.

And that’s why Fire & Flower Holdings Corp (TSE:FAF, OTCMKTS:FFLWF) deserves our attention now.

Fire & Flower Holdings is a Canadian cannabis retailer. From February 1 to February 16, FFLWF stock went from $0.60 to $1.15, marking a 90.7% gain in just over two weeks.

Unsurprisingly, that massive surge was followed by a retracement of the gains. After opening at a high of $1.20 per share on February 18, Fire & Flower stock started trending downward and hit a low of $0.82 at the end of March.

Now though, the stock seems to be consolidating around its 50-day moving average. For investors who missed out on the previous rally and believe in the future of the company, this would be a time to pay special attention.

Fire & Flower Holdings Corp (OTCMKTS:FFLWF) Stock Chart

Chart courtesy of StockCharts.com

Headquartered in Edmonton, AB, Canada, Fire & Flower is a multi-brand pot retailer. It owns and operates the “Fire & Flower,” “Friendly Stranger,” “Happy Dayz,” and “Hotbox” brands. According to its latest investor presentation, the company has more than 75 operating corporately-owned retail cannabis stores across Canada. (Source: “Investor Presentation,” Fire & Flower Holdings Corp, February 4, 2021.)

Canada legalized recreational pot in October 2018, but the pot retail industry is still highly regulated in the country. In some provinces, such as Quebec and Nova Scotia, there are no private-sector retail stores for cannabis products. Instead, the role is filled by government-controlled entities. And even in places with private-sector retail models, it’s not easy to obtain a license to open a new store.

Therefore, Fire & Flower Holdings Corp’s established presence in the business—the company has operating stores in Ontario, Alberta, British Columbia, Saskatchewan, Manitoba, and Yukon—makes it stand out.

Another thing worth noting about FFLWF stock is that the company has received a strategic investment from Alimentation Couche-Tard Inc (TSE:ATD.A, OTCMKTS:ANCTF). (Source: “Alimentation Couche-Tard and Fire & Flower Announce Closing of Strategic Investment,” Fire & Flower Holdings Corp, August 7, 2019.)

Alimentation Couche-Tard not only is a leader in the Canadian convenience store industry, but also has licensing agreements in more than a dozen countries around the world. Therefore, Fire & Flower might be able to leverage this relationship to increase its international growth capabilities.

As it turns out, this pot retailer’s business has already been firing on all cylinders.

In the 39-week period ended October 31, 2020, Fire & Flower generated CA$84.8 million of total revenue, representing a 147% increase year-over-year. The company’s gross profit totaled CA$29.0 million, up 133% from the CA$12.5 million earned in the year-ago period. (Source: “Fire & Flower Announces Third Quarter 2020 Financial Results and Achieves Positive Adjusted EBITDA,” Fire & Flower Holdings Corp, December 15, 2020.)

Notably, in the third quarter of the company’s fiscal year 2020—the 13-week period ended October 31, 2020—Fire & Flower generated adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of CA$1.2 million. This represented a milestone achievement because, in the second fiscal quarter, the company’s adjusted EBITDA was negative CA$300,000.

And the growth story is just getting started.

In a note to investors last December, Fire & Flower Holdings Corp’s chief executive officer, Trevor Fencott, said, “Despite the challenges presented by the COVID-19 public health crisis, Fire & Flower has continued to grow and demonstrate leadership as the largest cannabis retailer in Canada.” (Source: Ibid.)

He added, “We continue to work at maintaining positive Adjusted EBITDA and aggressively pursue growth opportunities for the Company.”

Analyst Take

For the most part, the hottest pot stocks are the ones that grow their own cannabis and make their own cannabis products. But it’s not rocket science to see that cannabis retail is a booming industry, too.

Fire & Flower stock has been quite volatile and, at the time of this writing, has pulled back to about $1.00 apiece. If investors warm up to Fire & Flower Holdings Corp again, the next upside move probably won’t be a small one.