Cannabis Reform Is 'By Far The Main Catalyst,' Analyst Discusses Jushi's Q4 Financial Results

Jushi Holdings Inc. JUSHF JUSH released its financial results for the first quarter of 2022 ended March 31, 2022, revealing revenue of $61.9 million, an increase of 48.5% year-over-year.

Sequentially, revenue fell 6%, being in line with markets in which the company operates, with three states accounting for over 90% of total sales during the quarter, including Illinois, Massachusetts and Pennsylvania.

"Looking ahead to the remainder of the year, we expect to open an additional four dispensaries and continue to build out the grow rooms in our Pennsylvania and Virginia grower-processor facilities, which will increase our margins and substantially grow our wholesale sales in 2022 and beyond," said Jim Cacioppo, the company’s CEO, chairman and founder.

The Analyst

Cantor Fitzgerald’s analyst Pablo Zuanic retained a Neutral rating on the company’s stock while lowering the price target to $2.50 from $3.05.

The Thesis

Zuanic said that the main catalyst remains reform news, adding that the Safe Banking Act is the “most realistic near-term option, at best."

About a quarter of voting members of the U.S. House recently joined forces to urge congressional leaders to enact marijuana banking provisions into law as part of the large-scale manufacturing bill - America COMPETES Act.

The group of 24 senators from both sides of the aisle have lined up behind an idea that the bipartisan Secure and Fair Enforcement (SAFE) Banking Act would "help cannabis-related businesses, support innovation, create jobs, and strengthen public safety in our communities."

So far, the SAFE Banking Act, introduced by Rep. Ed Perlmutter (D-Colo.), has managed to pass the U.S. House six times in the last three years. The bill, which Rep. Perlmutter attached as an amendment to the America COMPETES Act earlier this year, still needs to pass the Senate.

“Given sector volatility and depressed valuations in the MSO group we take a lower-risk approach and prefer companies with above-average breadth/depth, more established operations, strong balance sheets, and less execution risk,” the analyst said.

Jushi's “narrowly defined” net debt of $70 million is “manageable at 0.3x current annualized sales,” Zuanic said, adding that “broadly defined” net debt was $247 million, or 1.2x sales.

Price Action

Jushi’s shares traded 3.17% lower at $1.83 per share at the market close on Wednesday afternoon.

Photo: Courtesy of Chris Liverani on Unsplash