Throughout 2020, the pandemic was problematic for several cannabis stocks. Planet 13 Holdings made smart use of the pandemic and the lockdown that helped its share price go up from $2.05 on January 1, 2020, to [stock_market_widget type=”inline” symbol=”PLNHF” template=”basic” color=”default”] where it is trading today. On paper, Planet 13 seems like a strong buy – but is this cannabis stock worth the risk?
Planet 13 Holdings is a cannabis company based in Nevada, United States. It cultivates, produces, and distributes cannabis and cannabis-infused products for medical and retail cannabis markets in Nevada. The company’s brands include the likes of Planet 13, Medizin, TRENDI, Leaf & Vine, HaHa, and Dreamland Chocolates brands. The company recently purchased a 45,000 sq ft indoor cultivation facility to expand its production. In November 2020, it was able to reopen its Medizin dispensary in Las Vegas after a two-year hiatus.
Superstore Push for Planet 13
Planet 13 doesn’t just sell marijuana products. It sells an experience. What did you expect? It is situated in Vegas after all. Its Planet 13 SuperStore, spread over 112,000 sq ft is located close to the famous Vegas strip and is a major tourist attraction.
It doesn’t matter whether you are a cannabis consumer or not, people throng to the store for the ‘experience’. All visitors to the store can see the company’s production process and if they can also pick up the pot brands stocked there. In fact, Planet 13 attracted more than 1 million visitors in 2019.
Think of the superstore like a Scottish whisky distillery or an IKEA store where people come to while away time or just come to see what the fuss is all about. The store also has a restaurant – perfect for customers who get a sudden urge to eat everything in sight.
This superstore performed well despite the pandemic lockdown where it operated at only 50% capacity. The company reported $22.8 million in revenue for Q3 of 2020, a 36.5% increase over the corresponding period in 2019. This is a staggering number when you consider that Vegas was under shutdown for most of Q2 and Q3 and tourist traffic in the city was only at 40% of what it used to be.
Planet 13 follows a vertically integrated business model where it grows its own pot and makes its own products for the wholesale and retail markets. Apart from selling at SuperStore, the company’s brands are sold to dispensaries owned by others as well. It is common to have Planet 13 brands as some of the top-selling SKUs (stock-keeping units) in other dispensaries. This is all good news for Planet 13 stock – but is it worth the risk?
Planet 13: What’s Next?
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The company stock currently trades at 52x EV/EBITDA based on its third-quarter financials which is higher than most leading MSOs that trade at a multiple of 20-30x EV/EBITDA.
Comparatively, the cannabis stock is expensive and it needs to justify its valuations. One factor in Planet 13’s favor is that the Nevada market is estimated to grow at a 16.9% CAGR until 2025. Planet 13 accounts for 10% of total pot sales in the market, and the company will do all it can to maintain and increase that number.
Planet 13 will also look outward. It will look to replicate its SuperStore model in other lucrative markets. It is opening its 55,000 sq ft Santa Ana, California SuperStore in July 2021.
In an interview with Proactiveinvestors.com, Co-CEO Bob Groesbeck said, “We’ve laid out a clear roadmap for investors. We are opening our next SuperStore in Santa Ana and over the next couple of years would like to have SuperStores in major cities and tourist locations across the US. We’re talking places such as Chicago, Boston, Phoenix and also Orlando, if Florida shifts to recreational legalization.”
The way the company looks at a SuperStore location is simple: If the city is home to a sports team, it is capable of hosting a Planet 13 SuperStore.
Planet 13 is sitting on $140 million of cash and is debt-free. In an interview with Forbes, Larry Scheffler, Co-CEO said that the company is in no hurry to buy out the competition. He said, “People are like, ‘when are buying something?’ When we find the right thing, we buy it. That’s why you invested in us. Don’t get a big head and start buying to buy, it’ll eat you up eventually.”
Bottom Line: Is Planet 13 Stock Worth the Risk?
Planet 13 Holdings appears to be risky because let’s face it, it is a one-trick pony. However, it performs that one trick better than anyone else in the business. We believe that Planet 13 is certainly one cannabis stock that’s worth the risk.
Planet 13: Is This Cannabis Stock Worth the Risk?
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