Jushi's Value Lies In PA & VA, But This Cannabis MSO Also Has Above Average Debt

Jushi Holdings Inc. JUSHF, a vertically integrated, multi-state cannabis operator released preliminary financial results for the third quarter of 2022, with revenue of $72.8 million, up by 34.9% year-over-year, and flat sequentially.

Gross profit was $27.7 million, an increase of 18.9% year-over-year and 4.0% as compared to Q2 2022. Net loss was in the range of $52.9 to $62.8 million, compared to a net loss of $39.7 million in the same period year ago. Adjusted EBITDA amounted to $700,000 which was flat as compared to $700,000 in Q2 2022, and a decrease of $5.5 million compared to $6.2 million in Q3 2021.

The Analyst

Cantor Fitzgerald’s Pablo Zuanic kept a ‘Neutral’ rating on Jushi stock, raising the price target to $2.35 from $2.25.

The Thesis

With the industry’s consolidation trend, the analyst recognizes the value in Jushi’s retail network in Pennsylvania and vertical license in the northeast region of Virginia. “We say so especially if we get increased visibility on Pennsylvania going recreational and the actual start of recreational sales in Virginia by Jan.1, 2024,” Zuanic said in a Wednesday analyst note.

Among the things that keep Zuanic “sidelined” are the company’s above-average debt, and valuation – “hefty EBITDA premium to multi-state operator peers.”

The company’s management repeated their fourth quarter annualized revenue guidance to between $320 million and $350 million, after previously cutting revenue and adjusted EBITDA guidance by 10% and 13% respectively during the first quarter call.

Now, Jushi expects sales growth and improved profitability to come from Virginia and a successful transformation into a vertically-integrated company. “Long-term they anticipate 50-60% of vertical sell-through of own branded products (compared to 28% in 3Q22),” the analyst noted.

“We prefer to remain sidelined (Neutral) given above average net debt and execution risk (i.e., risk of missing EBITDA consensus),” Zuanic said, concluding that “given sector volatility, we require at least 50% upside to rate stocks Overweight.”

The Price Action

Jushi shares closed Tuesday's market session 2.35% higher at $1.74 per share. 

Photo: Courtesy of Alex Woods on Unsplash