Vireo Health International is a physician-led cannabis company which works on bringing the best of science, technology and engineering into the cannabis industry. The cannabis company distributes its eco-friendly brands through its network Green Goods retail dispensaries and other dispensaries in eight markets. Vireo Health has 16 operating dispensaries and 29 retail dispensary licenses as of now. The company has been very busy in 2020, and the stock has surged from $1.08 at the end of September 2020 to $3.12 as of March 10, that’s an upside of almost 189%. With so much traction in six months, the question on everyone’s minds is: Is Vireo stock overvalued?
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Vireo’s Q3 Results
Vireo’s Q3 2020 results show total revenue of $13.4 million, an increase of 68% from the corresponding period in 2019. Gross profit before adjustments was $5.1 million which is 43% of the total sales. Total operating expenses excluding depreciation and share-based compensation were $6.9 million.
Net income came in at $0.1 million compared to a loss of $14.6 million in the same period in 2019. The primary reason behind the profitable figure was a one-time gain of $16.5 million on the sale of Vireo’s former subsidiary Pennsylvania Medical Solutions.
Vireo has bet big on Arizona and other select markets where it sees room for high-growth. The company started building out its capacity expansion in Arizona last year. Arizona began its recreational cannabis sales in 2021 and is probably the best market for Vireo right now.
On February 18, Vireo announced it completed a major expansion of its cultivation and processing facility in Arizona. Founder and CEO, Dr. Kyle Kingsley recently said, “Our expansion in Arizona represents another strategic investment to drive growth in one of our core markets. With the rapid legalization of adult-use cannabis, the state is facing a potential shortage of cannabis flower. Our expanded facilities and additional growing acreage will create a real opportunity for Vireo Health in Arizona.”
Vireo is now getting out of its non-core assets. On October 1, Vireo announced that it would sell its Ohio business to Ayr Strategies Inc for $4.85 million. The company had previously sold off its Pennsylvania business to Jushi Holdings in August for $37 million. It is also looking at offloading Massachusetts and Nevada to better its cash position.
Vireo’s Liquidity & More
As of September 30, 2020, Vireo had cash on hand to the tune of $16.3 million which didn’t include the $16 million from the redemption of warrants and divestitures of Pennsylvania Dispensary Solutions (PDS). Dr. Kingsley had said, “However, cash inflows from the forced redemption of warrants and exercise of the PDS purchase option materialized sooner than we anticipated, and our improving liquidity position has enabled us to begin evaluating additional investment opportunities,” implying that the company was open to acquisitions.
Analysts are not bullish on Vireo stock at all. It has a ‘sell’ rating from most analysts with an average price target of $2.47. There is the feeling that Vireo has spread itself too thin and the company lacks focus on any one particular market. It doesn’t have the same pizzaz that a Planet 13’s SuperStore does or the market leadership of Trulieve Cannabis in the Sunshine State.
When one looks at a penny stock, there is an expectation of a lot of volatility in it but there are multiple other players in the market to choose from. But the company data is too fragmented and it is difficult to see Vireo grow in non-core markets like Maryland and Minnesota which then leads to the question: What is Vireo doing in those markets?
Bottom Line: Is Vireo Stock Overvalued?
The company has been very busy in 2020, and the stock has surged from $1.08 at the end of September 2020 to $3.12 as of March 10, which’s an upside of almost 189%. With so much traction in six months, the question on everyone’s minds is: Is Vireo overvalued? Cannin.com believes that Vireo Health pot stock is currently overvalued.
There are plenty of other excellent cannabis and hemp stocks to invest in. Check out our algorithm to see how you can profit from cannabis stock investing.
Is Vireo Stock a Overvalued?
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