Fire and Flower Holdings is not your typical cannabis company. Fire and Flower customers can order anything from vapes, oil, flower, edibles, and concentrates through their stores. The company also provides brand licensing and consulting services to licensed cannabis retail stores in Ontario. In addition, the company engages in the wholesale of regulated cannabis products and accessories in Saskatchewan. As most cannabis stocks remain volatile, is Fire and Flower a good buy?
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Fire and Flower: Explosive Potential in 2021
This multi-brand pot retailer owns as well as operates the brands ‘Fire & Flower’, ‘Friendly Stranger’, ‘Happy Dayz’ and ‘Hotbox’. Also, according to the company’s latest investor presentations, the company has 83 corporate-owned stores across multiple retail banners in Ontario, Alberta, British Columbia, Saskatchewan, Manitoba, the Yukon, and a wholesale distribution division called Open Fields Distribution.
Fire and Flower stock gained 73% between January 25 and February 15, moving from $0.8 to $1.39 in this period. However, this massive surge was followed by a fall to $1.02 on last look. The stock has been falling since February and it seems like it is consolidating around its 50-day moving average. From the looks of it, investors who have been keeping an eye out on the previous rally are keeping faith in the company.
Fire and Flower received strategic investments of $26 million from Alimentation Couche-Tard Inc, which is a leading Canadian convenience store but has licensed agreements in over a dozen countries all around the world. It was in July 2020, that the company launched two cannabis stores through this partnership. The company plans to leverage this collaboration to increase its international growth capabilities. They recently announced a planned debt-to-equity conversion of $52 million that will give Alimentation a 19.9% stake in Fire & Flower.
Additionally, the company recently announced the finalizing of a strategic agreement with BDS Analytics Inc via its fully owned subsidiary company Hifyre Inc. Along with this, the company now plans to enter the US cannabis market through a strategic licensing partnership with American Acres Managers.
It has also collaborated with artist Amr Elkouedy, to create an original piece of digital artwork with the help of Non-Fungible Token (NFT) Technology.
This is all great news but is Fire and Flower a good buy?
What Next for this Pot Stock?
The company is keeping a close watch on regulatory environments as well as taking proactive steps to ensure an early market entry when the additional legal marijuana retail opportunities grow both domestically as well as internationally.
For the 39 weeks ending on October 31st, 2020, Fire & Flower has managed to generate $84.8 million in total revenue, showing a 147% increase year-over-year. Its gross profit has totaled $29 million, up by 133% from a year ago. Its third-quarter for the fiscal year of 2020 showed adjusted earnings EBITDA of CA$1.2 million, which was a milestone achievement in itself, as in the second fiscal quarter, the adjusted EBITDA of the company was running at negative $300,000!
Fire & Fire now plans to up list to Nasdaq and is also hoping to open its first US dispensary in California, in the months to come. The current stock prices for Fire & Flower, as of 23rd April 2020 was $1.02, which is lower than analysts’ lowest price target of $1.75. However, analysts are suggesting that it may go as high as $2 – but does this make Fire and Flower a good buy?
Bottom Line: Is Fire and Flower a Good Buy?
Fire & Flower has a strong presence in the Canadian cannabis industry with over 67 operating cannabis retail store locations. Fire & Flower is acquiring new consumers by educating them about cannabis through their Hifyre digital platform which also maintains their sales analytics putting them ahead of their competition in terms of user retail experience.
Their stock price recently shot up over 50% in February 2021. This was driven by continuation of their aggressive M&A activity, well timed press releases about their stock listings, and new partnerships in the works.
First, they announced acquisitions of Busboy Ventures, Quad Nine Investments, and Friendly Stranger Holdings in late 2020. Then in 2021 they announced agreements to use Hifyre in CA, AZ and NV, bringing them into the United States. They also have the option to purchase their partner, American Acres, at a discount to market prices.
Next, the company announced they had submitted the initial applications to list their common shares on the Nasdaq stock market (currently listed on OTC in the USA). This would grant them access to much more capital.
Finally they’ve announced partnerships with analytics company BDSA, new debt-to-equity conversions, and membership gains over 200,000. All this has contributed to a huge early 2021 for Fire & Flower.
Will its stock price improve in the long term? Likely.
With total assets of $153 million CAD and total liabilities of $150 million CAD, the financials keep gaining strength. Revenue in Q3 2020 was $33 million CAD (240% growth from Q3 2019). They still aren’t profitable, but are very close to turning that around. Given this, as well as all the success stories outlined above, Cannin.com gives Fire and Flower a Strong rating for 2021.
Is Fire and Flower a Good Buy?
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