Cantor Fitzgerald Lowers Price Target On Jushi Holdings Cannabis Co. After It Pre-Announces Q2 2021 Financial Results, No Signs Of Slowing Down In IL And PA

Vertically integrated cannabis company Jushi Holdings Inc. JUSH JUSHF recently pre-announced its second-quarter 2021 financial results, with no signs of slowing down in its core states of Ilinois and Pennsylvania.

The Analyst

Cantor Fitzgerald's Pablo Zuanic kept a 'Neutral' rating on Jushi's stock but lowered the 12-month price target to $5.25 from $6.15 due to sectoral derating.

Q2 2021 Financial Highlights

A 15% sequential and 220% year-over-year growth in revenue to $47.7 million that the company reported in its latest earnings report was at the upper end of the guidance range, Zuanic noted, adding that it "is slightly ahead of the company's underlying market growth."

Adjusted EBITDA came in positive at $4.6 million, accounting for 9.6% of revenue, and according to the analyst, that was "not much improvement" from 7.1% in the prior quarter.

Nationwide Footprint

The company recently launched its 13th store in Pennsylvania, with additional stores slated to open by the year-end, which makes Jushi one of the companies with the largest retail footprints in the Keystone State. Moreover, the company expects to nearly double the square footage of its subsidiary's grower-processor facility in Scranton to 110 000 square feet by the second quarter of 2022.

In Illinois, Jushi runs four stores, including two Sauget-based stores and two in the college town of Bloomington.

"PA and IL account for close to 80% of company guidance for FY21, with PA guided at $103million and IL at $75 million, taking the midpoint," Zuanic disclosed.

In May, the company substantially strengthened its presence in Virginia by acquiring a 93,000 sq. ft. facility operated by its subsidiary, Dalitso LLC, for around $22 million. That deal also included almost nine acres of surrounding land in Prince William County, Virginia.

"While it is early days for the VA med program, the introduction of flower this Sept should help boost sales," Zuanic commented, considering that the company currently has one store in the state and plans to open two more before year-end and three more in 2022.

Jushi kicked off sales of medical marijuana at its first of six planned dispensaries in the state - BEYOND / HELLO medical dispensary in Manassas – in November.

In the meantime, Jushi also agreed to purchase Massacussets-based Nature's Remedy for $110 million, including two retail dispensaries in Millbury and Tyngsborough, as well as a 50,000 square feet cultivation and production facility in Lakeville.

"With the deal slated to close by Sept/Oct (we factor it in from 4Q21); we estimate the MA asset's EBITDA run rate this year at approximately $22million and sales near $70 million," Zuanic noted.

Jushi's operations in Ohio, Nevada, and California were also taken into account by the analyst.

Outlook

"Guidance calls for $205-255 million in sales for FY21," the analyst said, naming Pennsylvania, Illinois, Virginia and California as main contributors.

Supply-chain issues the company mentioned in its latest announcement will postpone production expansion plans in Pennsylvania and Virginia by about three months, and Zuanic estimates that "this could be about a $10 million hit to sales projections."

"Given the wide guidance range, we do not expect management to cut the outlook," he added.

Still, the analyst doesn't think that Jushi's "regional mix and retail-heavy model" could lead to >30% EBITDA margins for the 2022 calendar year.

The conference call to discuss the company's financial results for the second quarter of 2021 is scheduled for August 25.

Price Action

Jushi's shares were trading 3.86% lower at $4.61 per share at the time of writing Wednesday mid-afternoon.

Photo: Courtesy of Esteban Lopez on Unsplash