Planet 13 PLNHF Stock Will Push to $12.50 then continue to grow

Planet 13 Holdings PLNHF stock is one of my Top Picks – Best Marijuana Stocks To Buy Now.  There is a lot I like about this company and, I see continued capabilities with increases in this company’s revenue.  For now, they are really starting spend money on SG&A, Sales, General & Administrative.  That “Sales” part is what the focus is.

Nevada operations are effectively running at 100% with the dispensary.  You have to understand the concept to appreciate the capabilities of Planet 13 Holdings.  The dispensaries are mega-stores.  These are destination-style dispensaries.  When you consider that, having a mega dispensary, destination style store in Las Vegas makes a ton of sense.  But, Planet 13 needs to solidify their presence.  During COVID 19 lockdowns, the state of Nevada was crimped to some of the harshest capacities possible.

During that time, Planet 13 improvised the game plan and extended offers to the local population in order to grow a foundation of business.  This sustained Planet 13 through the dreary times.  Now, management is focusing on drawing in the Las Vegas tourists.  This will take time, effort, and money.  You can see this play out in the operating costs.  But, you can also see the efforts gain results with the increase in revenues.

Two things to look for with Planet 13 that I want to mention:

  • The Chicago, Illinois store should open on time over the course of its build-out, adding to greater potential longterm for Planet 13; and,
  • Future guidance from analysts have next year’s revenues at $0.12 EPS.

Planet 13 PLNHF Stock Comparison

Here are the numbers for comparing the cannabis companies on my Complete List of Top 100 Cannabis companies:

  • #15 Market Cap: $765M
  • #22 Revenue Growth Rate: 37.8%
  • #22 Gross Margins: 55.8%
  • #33 Operating Efficiencies: 57.3%
  • #27 EBITDA/Revenue: 2.4%
  • #3 Cash/Debt Ratio: 363%
  • #14 Total Assets: $188M

The above numbers are fairly solid for any one company.  The stand-outs are cash on hand and generally solid performance in all of the other metrics.

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Planet 13 PLNHF Stock Financial Data

Following is the breakdown of the financial data for Planet 13 Holdings PLNHF stock.  Pay particular attention to revenue growth and the increase in costs that got that to happen

Revenue

There is a big jump in revenue for the quarter:

Revenue: To see Planet 13 Holdings complete financial data, visit PLNHF stock pageTo see Planet 13 Holdings complete financial data, visit PLNHF stock page

Gains from the OC store were minimal so, there should be continued increases in revenue gains as the Orange County, CA store ramps up and gains revenues.  The revenue numbers were decent to get going for Orange County.  Next quarter should see bigger improvements.

Simultaneously, there is likely to be continued increases in revenues form the Las Vegas flagship store as the state of Nevada continues to draw in tourists.  Planet 13 Holdings had hoped this would be the target for its business; tourists.  However, COVID-19 saw the state really crimp down on activity and this greatly affected the store’s potential.  Now, we should see the gains we are looking for.

Gross Margins

For now, gross margins are solid, but, this may also drop somewhat because of the competitive nature of California:

Planet 13 Holdings Gross Margins
Gross Margins: To see Planet 13 Holdings complete financial data, visit PLNHF stock page

Management stated in its last release that the competitive nature in California may keep gross margins lower than potential since price pressures are evident and keeping a lid on gains.  This may prompt many companies to pursue a more “premium” approach with their respective products in order to maintain higher margins.

Eventually, companies will get better and better at earnings improved margins.  Plus, with more revenue moving through any one individual dispensary, this will continually improve the overall margin picture.

Operating Efficiencies

Here, you can see the effects of management getting heavily involved in advertising to bring in the revenue gains we saw above:

Planet 13 Holdings Operating Efficiencies
Operating Efficiencies: To see Planet 13 Holdings complete financial data, visit PLNHF stock page

Operating efficiencies are a mathematical formula of dividing total operating costs over total revenue.  This tells us how effectively management earns revenues.  Within total operating costs are SG&A and D&A; the latter being Depreciation & Amortization that we subtract out to determine EBITDA.

Sales were pushed.  Increased revenue resulted in the sales push.  Now, what we are looking for is a continued increase in revenue while maintaining a constant sales effort.  We want to see increased and continual sales being generated by a constant sales effort.  Basically, Planet 13 needs to build a solid customer foundation.

EBITDA Profits

Mostly, Planet 13 has been EBITDA profitable for some time, although there have been fits and starts with the consistency:

Planet 13 Holdings EBTIDA
EBITDA: To see Planet 13 Holdings complete financial data, visit PLNHF stock page

I like consistency a great deal.  This is a good starting board on which to work towards seeing more metrics that increase in certain areas.  If the expenses that Planet 13 are incurring continue and revenues move higher, EBITDA should gradually increase, which will eventually translate into continued increases in net earnings.

Net Earnings

This is where I will be focusing over the next year; Net Earnings:

Planet 13 Holdings Net Earnings
Net Earnings: To see Planet 13 Holdings complete financial data, visit PLNHF stock page

I am sticking with my initial call of $12.50 for Planet 13 Holdings.  This price target is driven by the $0.12 EPS and a forward 100x multiple.  As it turns out, other analysts are also calling for the same $0.12 EPS.  However, I am not certain what forward multiple each respective analyst is picking.

Keep in mind, the broader S&P 500 is pricing in 3.5% annual revenue gains and margins and costs that are different than Planet 13 on average.  The S&P 500 is an average of 500 different companies and, this gives a good representation of the broad market in general.  The S&P 500 is pricing in 40x future earnings for the average of the 500 companies.

Planet 13 Holdings outperforms the S&P 500 in many areas; revenue growth alone is one metric.  The 100x multiplier for future revenue is on target.

Cash On Hand

Planet 13 Holdings has a lot of cash on hand:

Planet 13 Holdings Cash On Hand
Cash On Hand: To see Planet 13 Holdings complete financial data, visit PLNHF stock page

Management has eluded to acquisitions in the future, putting together some deals that would expand their foundation.  Perhaps Planet 13 would want to align themselves with existing companies that have a presence in other states that are not utilizing all of the grow capacity? This would be an interesting move that I would want to watch out for.

Nonetheless, look for all of this cash to be put to work because Planet 13 is in a strong position to acquire other companies.

Cash Debt Ratio

Here is what I mean when I say that Planet 13 is in a very strong cash position:

Planet 13 holdings Cash Debt Ratio
Cash Debt Ratio: To see Planet 13 Holdings complete financial data, visit PLNHF stock page

Look for big moves moving forward, and if Planet 13 can acquire a solid company without having to spend any cash on the deal, this foundation will grow solidly as cannabis stocks and undervalued marijuana stocks are acquired at excellent rates.

Total Equity

Here is a look at total equity:

Planet 13 Holdings Total Equity
Total Equity: To see Planet 13 Holdings complete financial data, visit PLNHF stock page

You want to see that management is building the necessary capacity to increase revenues and, by extension, profits.  Here is where you look for that; total equity.  Total equity is, of course, total assets, less total liabilities.  As long as these numbers continue to climb, management si putting all of the pieces of the puzzle together.

Planet 13 PLNHF Stock Chart

Unfortunately, PLNHF stock is not following its fundamentals; PNHF stock is sliding lower and lower:

Planet 13 Holdings PLNHF Stock Chart
Planet 13 Holdings PLNHF Stock Chart

I see this as being totally short-sighted.  Planet 13 Holdings will be a strong company.  While their profits are meandering up and down for now, we are more likely to see increased profits moving forward, which investors will be chasing after.

Is Planet 13 PLNHF Stock a Good Investment?

Mr. Market often offers buyers a great opportunity at a discount.  PLNHF stock is greatly discounted considering the future value.  For now, the stock is being pressured lower and lower by relentless short selling.  The thing is, the fundamentals favor most cannabis stocks to be moving to the upside.  There are a lot of cannabis stocks that should be pushing higher and higher.  Planet 13 is one of them.

One day, the short sellers are going to be taking it on the chin.  For now, undervalued marijuana stocks are everywhere and, PLNHF is one of them.

I will maintain my price target of $12.50 for PLNHF stock.  It is currently trading below $4.00.  That would be a 200% increase for those that see this as an opportunity.

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