Cannabis Company Planet 13 Endures Setbacks: Embezzlement Claims Precede Discounted Valuation

Planet 13 Holdings PLNH, a multi-state cannabis operator, has lagged 55% behind its peers this quarter, affected by a poorly timed equity offering and alleged embezzlement issues, according to senior analyst Pablo Zuanic.

Despite these challenges, its stock trades at a 35% discount, with a valuation of 1.1x 2024 sales—lower than the industry average of 1.7x.

Zuanic signals strong prospects, especially with Florida's looming market opportunities. Planet 13 stands out as a retail leader in Nevada with a scalable superstore model, poised for growth with potential Florida cannabis legalization.

Legal Tussle In The Cannabis Sector

Planet 13 Holdings has launched a $16.5 million lawsuit against Casa Verde Capital, co-founded by Snoop Dogg and El Capitan Advisors for alleged fraud. Filed in Los Angeles, the suit accuses both firms of deceitfully promoting their cannabis investment success to attract clients, including Planet 13, which entrusted them with $21 million,

reported Green Market Report.

Planet 13 contends El Capitan was a facade enabling Casa Verde to profit at its expense. While seeking damages and judicial oversight over El Capitan, Planet 13 aims to recover lost funds. Casa Verde denies any wrongdoing, stating its disappointment at being sued despite offering cooperation.

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Financial Highlights And Projections

The fourth quarter of 2023 saw a decrease in total sales, with notable declines in Nevada and California. However, improvements in gross margins and a reduction in cash SGA have contributed to a more favorable EBITDA margin.

This means the company made more profit per sale and spent less on operating expenses, leading to better overall earnings before interest, taxes, depreciation, and amortization. The company reported becoming more efficient and profitable, improving its financial health.

Planet 13 ended CY23 with $17.3Mn in cash, and after accounting for various transactions, management expects to have $33Mn in cash post-VidaCann deal closure.

Strategic Moves And Future Prospects

PLNH's strategic initiatives include the acquisition of VidaCann, capital raises to fund expansion and evaluating tax positions to potentially reclaim millions in overpaid taxes.

The acquisition of VidaCann positions PLNH to capitalize on the Florida market, with plans to expand its store network significantly.

Furthermore, the company's approach to scaling its presence in Nevada and improving operational efficiencies is expected to drive future growth and enhance shareholder value.

Market Opportunities And Expansion Strategy

Florida presents a significant opportunity for Planet 13, with the potential for a sizable increase in revenue and EBITDA margin from the state's recreational market.

According to Zuanic the company's strategy to bring new brands and practices to the VidaCann stores, along with plans to expand the store network underlines its commitment to capturing a larger market share in Florida.

Proforma Valuation And Investment Outlook

Despite recent challenges, including a notable stock price decline, PLNH's proforma valuation reveals a substantial discount compared to the sector average.

The analysis suggests that the stock's current valuation does not fully reflect the potential EBITDA growth from the Florida market, the scalability of its superstore concept, and plans to bolster its Nevada franchise.

“With a proforma enterprise value (EV) of $164Mn and a stock price of $0.56, the company has proforma net cash of $33Mn and trades at 1.1x its projected 2024 sales of $148Mn. This valuation is a 35% discount compared to the sector average of 1.7x, highlighting its underpriced status,” reads the report.

Want to know more about companies' valuations, earnings, and investment opportunities? Join us at the upcoming Benzinga Cannabis Capital Conference in Florida at the new Hollywood venue on April 16 and 17, 2024. The two-day event at The Diplomat Beach Resort will be a chance for entrepreneurs, both large and small, to network, learn, and grow. Renowned for its trendsetting abilities and influence on the future of cannabis, mark your calendars – this conference is the go-to event of the year for the cannabis world. Get your tickets now on bzcannabis.com – Prices will increase very soon!

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