Jushi Holdings Inc: Overlooked U.S. Pot Company Set to Report Record Results

Jushi Stock Could Double in 2021

Jushi Holdings Inc (OTCMKTS:JUSHF, CNSX:JUSH) is an under-the-radar U.S. cannabis stock that has been on a tear in 2020. JUSHF stock has advanced 57.2% year-over-year, approximately 90% year-to-date, and 329% since hitting March lows.

Jushi stock hit a new 52-week high of $3.26 on October 15, which represents a 409% increase from March. The stock pulled back a little, mostly as a result of a broad-based sell-off in the second half of October.

The pullback certainly had nothing to do with Jushi’s operations or outlook. If anything, it has put JUSHF stock in a better trading range.

The company reported strong second-quarter results, with revenue climbing 73% sequentially and gross profit climbing 80% sequentially.

In early October, Jushi Holdings Inc announced preliminary third-quarter results, and the company said it expects to report record revenue of $24.0 million.

The outlook for the fourth quarter is also encouraging, with total revenue expected to be at the high end of Jushi’s previously announced guidance range of $25.0 to $30.0 million. The company also expects to report positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA).

The next few years look solid for Jushi. First, the projected legal cannabis market in the U.S. is expected to reach $37.0 billion in 2024. Second, more and more states are legalizing medical and recreational marijuana, which is putting additional pressure on the White House to reconsider its stance on federal pot laws.

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JUSHF Stock Overview

The Boca Raton, FL-based Jushi Holdings is a multistate owner and operator of cannabis cultivation, processing, and retail licenses. Its targeted footprint includes Pennsylvania, Illinois, Virginia, California, Nevada, and Ohio. (Source: “Investor Presentation, October 2020,” Jushi Holdings, Inc., last accessed November 9, 2020.)

These properties give the company 11 open retail locations under the “BEYOND/HELLO” brand. Jushi also plans to open 19 more locations. That doesn’t include operations in states where the company expects to enter.

In addition to its established brand partners, Jushi manufactures and distributes its own branded marijuana flower, vape, edible, and cannabidiol (CBD) products.

The company has three cultivation and manufacturing facilities:

• The 90,000-square-foot facility in Scranton, PA can yield up to 10,000 pounds of dried flower annually
• The phase-one 30,000-square-foot operation in Manassas, VA is expected to yield 6,000 pounds of dried flower annually
• The 10,500-square-foot facility in Las Vegas, NV is expected to yield 2,500 pounds of dried flower annually

Q2 Revenue Increases 73% Sequentially 

In August, Jushi announced that its revenue for the second quarter ended June 30 increased 73% sequentially to $14.9 million. (Source: “Jushi Holdings Inc. Reports Second Quarter 2020 Financial Results,” Jushi Holdings Inc., August 27, 2020.)

That big increase was driven by Jushi’s acquisition of two medical marijuana dispensaries in Illinois and strong organic growth from the company’s BEYOND/HELLO stores in Pennsylvania.

Second-quarter 2020 gross profit was $7.5 million, for a gross margin of 50%, an 80% sequential increase over the first-quarter 2020 gross profit, which had a gross margin of 48%.

That increase was fueled by increased sales of recreational marijuana, an improved product mix, improved purchasing practices, and more disciplined promotional offers.

Jushi Holdings Inc reported a second-quarter net loss of $9.3 million, or $0.10 per share, compared to a first-quarter 2020 net loss of $15.9 million, or $0.17 per share.

The company’s adjusted EBITDA loss was $1.2 million, compared to a loss of $46.0 million in the first quarter. The adjusted EBITDA margins have continued to steadily improve during the quarter through the combination of higher gross margins, reduced operating expenses, and improved store revenue performance.

“We’re thrilled with the ongoing performance of our operations in Pennsylvania and Illinois, which drove our strong sequential quarterly revenue growth of 73%,” said Jim Cacioppo, chairman and CEO.

“As we move into the second half of the year, we’re focused on maintaining this momentum by continuing to build depth in the markets where we operate today, while thoughtfully driving operational improvements across our footprint.” (Source: Ibid.)

Financial Outlook

Looking ahead to the third and fourth quarters, Cacioppo added, “As a result of the strong first half results and our expectation for continued strong operating results in the second half of the year, we are providing third quarter revenue guidance of $22 to $25 million and expect third quarter Adjusted EBITDA to be close to breakeven.”

Cacioppo reaffirmed Jushi’s fourth-quarter 2020 revenue guidance of approximately $25.0 to $30.0 million and expects the company’s fourth-quarter adjusted EBITDA to be positive.

Jushi also reaffirmed its 2021 revenue guidance of $200.0 to $250.0 million and provided 2021 adjusted EBITDA guidance of approximately $40.0 to $50.0 million.

On October 1, the company announced preliminary financial results for its third quarter ended September 30 and provided updated guidance for its fourth quarter and fiscal year 2021. (Source: “Jushi Holdings Inc. Expects Record Third Quarter Revenue of Approximately $24 Million,” Jushi Holdings Inc, October 1, 2020.)

Jushi expects to report:

• Q3 2020 revenue of $24.0 million, compared to the previously announced range of $22.0 to $25.0 million, representing 61% sequential growth
• Q4 2020 total revenue at the high end of the previously announced range of $25.0 to $30.0 million, and positive adjusted EBITDA
• Total fiscal year 2021 revenue of $205.0 to $255.0 million, up from the previously announced range of $200.0 to $250.0 million, and adjusted EBITDA in the range of $40.0 to $50.0 million

Jushi’s strong outlook does not take into account any significant changes in the regulatory environment. Should that change, Jushi will probably provide additional upward guidance.

Analyst Take

Jushi stock is an excellent cannabis stock that has been flying under the radar of Wall Street. But that overlooked status won’t last.

Jushi Holdings Inc has a solid balance sheet with $44.0 million in cash, and it has been reporting strong sequential revenue growth. The company expects to report record third-quarter revenue.

Its fourth-quarter and fiscal 2020 outlook is also bullish, but not as bullish as its outlook for fiscal 2021, when Jushi expects to report even stronger revenue growth and adjusted EBITDA between $40.0 and $50.0 million.