MariMed Wholesale Revenue Up 48% Driven By Top Marijuana Brands: Why Is This Weed Stock Undervalued?

MariMed Inc. MRMD, a notable player in the US cannabis market, recently reported its financial results and forward-looking guidance, revealing strategic moves to navigate the sector's evolving landscape.

In a detailed analysis, Pablo Zuanic, senior analyst at Zuanic & Associates highlighted the company's position in a competitive market.

Guidance And Valuation Insights

Despite trading at 4.6x EBITDA—below the Multi-State Operator (MSO) average of 7.3x—MariMed's brand portfolio shines, boasting a 48% increase in wholesale revenue for 2023 and projecting over 20% growth for 2024.

However, the company's CY24 sales guidance falls short of expectations, estimated at $156-159 million, below the consensus of $175 million.

Adjusted EBITDA is anticipated to be around $25 million, slightly up from the previous year but still under the expected $38 million.

Zuanic attributes this conservative guidance to management's caution, regulatory uncertainties, and market headwinds, including competitive pressures and price deflation in certain states.

Yet, he notes the potential for growth through operational expansions and the introduction of new products, like gummies in Illinois and increased cultivation capacity in Maryland.

Market Position And Future Outlook

Despite a 21% decrease in MRMD shares over the past 90 days, Zuanic maintains an Overweight rating on the stock, citing its strong wholesale growth and underutilized brand power.

He suggests the stock's valuation discount, particularly in EBITDA, is exaggerated and sees limited downside risk.

Looking ahead, Zuanic points to macro catalysts like federal cannabis rescheduling and banking reform as potential market movers. However, he tempers expectations given the current political climate.

According to Zuanic, MariMed's focus on organic growth and strategic expansions, coupled with its discounted valuation, positions it favorably for future gains, especially with its promising ventures in Ohio.

"In the last 90 days, MariMed's shares have dropped 21%, a stark contrast to the MSOS ETF's 23% rise and the S&P 500's 10% gain. This underperformance, likely due to its lower recreational market potential and only 1% ownership by MSOS ETF MSOS (compared to 10-14% for companies like Jushi JUSHF and AYR AYRWF), seems unwarranted to us,” Zuanic wrote.

“With a current market valuation of $173 million and trading at metrics below industry averages, we find the EBITDA discount excessive and maintain our Overweight rating, seeing limited downside risk."

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