Jushi's Earnings Power Is Evolving But This Analyst Remains Sidelined, At Least For Now

Jushi Holdings Inc. JUSHF reported its financial results for the fourth quarter and full-year ended December 31 last week, revealing a 159% year-over-year increase in revenue to $209.3 million in 2021.

The company's fourth-quarter revenue totaled $65.9 million, representing an increase of 22% sequentially and 104% year-over-year.

Still, Jim Cacioppo, the company's CEO and one of the speakers at the upcoming Benzinga Cannabis Capital Conference which returns on April 20-21 in Miami said "after reporting strong sequential revenue growth in the fourth quarter of 2021, we are experiencing a slowdown in revenue as we begin the year."

Cacioppo added that the company revised its previously provided guidance range to an annualized fourth quarter 2022 run-rate due to "a combination of headwinds," such as seasonality, macroeconomic factors, regulatory delays, and supply chain issues.

"We now expect fourth-quarter revenue on an annualized basis to be between $375 to $425 million and Adjusted EBITDA to be between $70 to $90 million on an IFRS basis," he said.

Cantor Fitzgerald's analyst Pablo Zuanic said that the company didn't issue guidance for the full year because the company's earnings power seems to be "evolving" with "new capacity coming through in the summer and new store."

The Analyst

Zuanic kept a Neutral rating on its stock, lowering its 12-month price target to $3.05 from $3.4.

The Thesis

Prior to cutting its 2022 guidance, Jushi expected to generate sales of $375-425 million.

The analyst said the reduced outlook resulted from "the macro slowdown, pricing pressures, and operational delays."

He added that, same as for other operators among the MSO group, "the story is more about the earnings potential for CY23 (and beyond) than just for CY22."

The company intends to open ten stores in 2022 and another four in 2023.

It ended 2021 with 28 stores, including 18 In Pennsylvania, 4 in Illinois, and two in each Virginia, Massachusetts and California.

"We appreciate the company's near retail leadership in PA, VA exposures, and increasing vertical integration (as opposed to a mostly retail reliant model before," Zuanic said, adding that "we do not find the valuation compelling in relative terms (to MSOs), so we prefer to remain sidelined."

Price Action

Jushi's shares traded 3.18% lower at $3.04 per share at the market close on Monday.

Photo: Courtesy of Chris Liverani on Unsplash