HI Kevin,
Planet 13 is one of the few cannabis companies that has had something to cheer about. It has performed quite well and is up by 78% this year. Why the outperformance? Likely because it is differentiating itself from its competitiors. It is focused on the customer experience, versus just being another pot shop or producer.
Its Cannabis SuperStore complex in Las Vegas is turning out to be quite the destination. It is the closest dispensary on the strip and hosted more than 1 million visitors in 2019. Its in-house brand accounts for 29% of of SuperStore sales, and it services 26 dispensaries in Nevada. It's unique model, and ability to leverage the Las Vegas limelight is the main reason why it stands out.
The question is, can this concept be further expanded beyond Nevada? Although there are a few, there are very few destinations quite like Las Vegas. Since its flaghip entertainment centre opened, revenue has remained relatively flat. Over the past five quarters, revenue is stuck in neutral between $16.5 and $16.8 million.
The company is planing on launching its brand nationwide, but as we've seen from others, there are plenty of pitfalls here. The next SuperStore is expected to open in the first half of 2021 in Santa Ana, California. Keep in mind this may be pushed back if the pandemic leads to significant shutdowns. Over the long-term it expects to open at least 8 SuperStores over the next five years.
As of end of last quarter, it has $13 million in cash. Given the company is looking to expand at a rapid pace, it was likely that a cash influx was needed. This came in early July in the form of a $11.5 million share offering. It likely won't be the last time the company taps the market for additional funds. Not necessarily a bad thing - just something to be aware of.
The company is trading at 10 times sales and 15 times book value and after its most recent run-up is now in overbought territority with a 14-day RSI of 81. I find it a little expensive given expansion will require considerable capital, and from a technical perspective may be due for a short-term correction.
Overall, it is an interesting model and stands out. It is however, a speculative play and as we've seen from the industry can be highly volatile.
Mat