4Front Ventures FFNTF Stock Forecast & Analysis

Cannabis Federal Legalization Via Biden Reclassifying cannabis.

4Front ventures FFNTF stock, is a cannabis company that is building up a tremendous amount of momentum.  There are a lot of things I like about 4Front Ventures.  And, I wanted to get the FFNTF stock forecast up onto the website as we get closer to cannabis federal legalization.  FFNTF stock is one of those companies that I could very easily put into my Top Picks – The Best cannabis stocks.  But, who do I replace with it?  Nonetheless, 4Front will be disruptive as they move forward.  And, FFNTF stock will move up because of that.

4Front Ventures was founded in Washington State and they have maintained one of the best positions in certain categories for cannabis companies in the state.  4Front Ventures produces the #1 edible and the #2 flower in the state of Washington.  Meanwhile, 4Front is also in Massachusetts and California and is gaining market share.

Low-Cost White Label

One of the focuses for 4Front is providing low-cost production for outside premium products.  I’m not the world’s biggest fan of these endeavors.  Typically, the better margins are in premium production and sales.  However, 4Front has achieve some of the lowest cost production levels possible.  This basically undercuts all competition forcing premium products to go through 4Front’s system.  By doing so, this supports the overall operations by pushing volume through the system and enabling production costs to be covered.

Market Positioning

Here at Cannabis Investing Newsletter, I tend to take a highly quantitative approach to my analysis.  One example that stands out to me is the fact that I do not consume cannabis and, therefore, have no opinion on any one product over another.  I think this is an asset.  If someone believes that a particular product is better than any another and that this is the basis for investing in a cannabis stock.

On the contrary, I look for the masses to tell me what is going on with any particular brand.  If a company can hold and maintain a strong position in the overall market it is very likely due to the fact that the product is of very high quality and that is driving demand.

Given that, the fact that 4Front Ventures is sitting on the #1 edible & #2 flower position in the State of Washington, they are likely to do well in other states they enter.

Every single cannabis company has a plan.  But, if they have inferior product quality or lack management expertise to execute the plan, then who cares how good the plan is?

4Front Ventures – The Disruptors

In the most recent financial conference, management pointed out the strong growth in California that 4Front Ventures is seeing with the new dispensaries.  And, the same results are starting to come out of the smallish dispensaries being used in Illinois.

In Illinois, the new facility will be ready to go in early 2023; one year from now.  That will give 4Front Ventures even more opportunity to reach into the market, disrupt, and gain market share.

The key thesis for 4Front Ventures is to provide low-cost product.  While I am certain all cannabis companies focus on this as a working model, 4Front tends to overemphasize this in a way that iterates it as a credo that is the only  focus.

Given the demand for its product, once new facilities are opened up and on line, look for very big increases in revenue as well as marked improvements in costs & margins.

The Long Game & 4Front Ventures

Right now, 4Front is still really early in its game with scaling up.  New facilities are opening and will continue to open in new markets: California, Illinois, Wisconsin, & Massachusetts.

For now, costs are skewed without the effects of revenue potential.  Image if 4Front products were so good that they were able to scale up to be the #1 edible and #2 flower in these new states?  This would be a tremendous opportunity.

For now, at least in California, there are headwinds with dispensary count, over supply and the lack of producers being able to getting product into enough dispensaries to service demand.  At the same time, the punitive tax system is shifting thanks to a Democratic governor who is finally seeing the burdens being caused.  This is likely to push growth in the state for cannabis.

The footprint that 4Front Ventures is laying now will reap huge benefits in the future.  I continually key in on the fact that 4Front Ventures has the #1 edible and #2 flower sales in the State of Washington.  And, they are bringing the same ‘game’ to these other states.  If 4Front Ventures’ game plan is, in fact, duplicable, getting into FFNTF stock now would mean a potentially big upside opportunity.

4Front Ventures FFNTF stock Forecast… for now

Because 4Front Ventures is still in its early stages, this makes it difficult to look forward to what potential EBIT numbers would be to incorporate into the FFNTF stock forecast.

Read: I’m probably on the low end.

Analysts are projecting big revenue increases over this year and next on a year-over-year basis.  But, we do not know as of yet what margins 4Front can bring to the fore in these new markets.  This makes looking at 4Front Ventures as a value investment difficult since we need to also see that they are still early in the growth stock stage.

Continually, I will update the FFNTF stock forecast incorporating the new costs, profits, and margins as they get printed.

But, for now, I am a bi believer that my projection is probably low, but I will let that ride out of an abundance of caution.

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4Front Ventures Financial Data

Here is a breakdown of the latest information from 4Front Ventures financial release.

4Front Ventures Gross Profits

  • 4Front Ventures Revenue

There was a small incremental gain in revenue for the latest quarter of 9%.  That gain in revenue took revenues near to the all time high for revenue for 4Front.  If there is another gain, 4Front will have hit a record.

However, despite that gain, Cost of Goods Sold – COGS – increased simultaneously.  This affected gross profits and gross margins.  Scaling up will get costs down.  This is the process that 4Front is going through now.  They’ve just launched heavily into California.  And, a long term perspective shows they will be able to make significant inroads, build up a business, and then go from there.

4Front Ventures Operating Profits

  • 4Front Ventures Operating Costs

Operating efficiencies are a mathematical ratio of costs over revenues.  If the numerator, the number at the top of the equation, remains constant, and the denominator, the number at the bottom continually gets bigger, the ratio goes down.

While there are very likely to be increases in operating costs associated with the new facilities in the additional states, revenue growth will outpace this significantly driving down operating efficiencies.  This is the clear pathway to improved metrics and profitability.

4Front Ventures is both a growth stock and value investment that will continually push FFNTF stock upward.

4Front Ventures EBITDA & Net Profits

  • 4Front Ventures EBITDA

The eventuality will be that 4Front builds itself a very large foundation and they become profitable.  It is a process, not an event.  And, when you consider where 4Front Ventures is, where its products rank against competitors, how big its future foundation will be and the numbers they will be able to serve in these markets, there will be a lot of future profits that will drive FFNTF stock upward.

Until then, it will be some time as 4Front Ventures builds up its margins by creating economies of scale with larger volumes.

4Front Ventures Cash On Hand

  • 4Front Ventures Cash on Hand

Considering that 4Front Ventures is expanding into 4 new states, I would have liked to see more cash on hand, especially relative to debt.  The new projects are not immediately accretive in the sense that everything will be paid for.  I do not believe that 4Front Ventures has the ability to immediately become profitable and start paying the bills on. these projects. But, that is not to say that they cannot raise more capital for these projects that are expanding.

4Front Ventures has already proven itself with its capabilities on a product quality basis.  The rankings are the best indicator for that.  What I would want to see is more profitability. while they expand. This is crucial so that you do not get yourself into a whole that you have to pay for by going in to debt.  I am always looking for some kind of balance between where they are and expanding into new markets.  This is what will support FFNTF stock.

4Front Ventures Total Equity

  • 4Front Ventures Total Assets

As the new projects continue to come on line, total equity will begin increasing.  Equity, the difference between total assets and total liabilities, is what will drive revenue increases.  With continued increases in equity, this will give 4Front Ventures the ability to build a bigger future opportunity.

For now, considering cash on hand as well as total liabilities and debt, total equity appears to be low.  And, there is also not much in the way of longterm upside growth.  But, I expect this will start to gradually shift upward.

Total equity is one thing that I look for that tells me if management is creating value for investors.  As total equity continually rises, so does the value, and its future potential, for FFNTF stock.

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4Front Ventures FFNTF Stock Forecast

4Front Ventures FFNTF Stock DCF

Analysts are looking for some big gains in revenue over this year and next year.  This checks out as 4Front will see big openings with projects in new markets.  However, what will be the costs, profits, and margins off of increased revenues?

My best guess would be that increasing revenue will improve economies of scale which, that will improve margins.  For the 4Front Ventures FFNTF stock forecast, however, I aired on the very low end of margins.

Given that there will be what I think might be a cat fight in California over market share, higher product price may be a headwind.  Cannabis companies may start to compete as much as they can with price and, that may be a driver of future margins & profits.

FFNTF stock forecast on the low end

Hopefully, I got this wrong and that I have aired on the ‘too-low’ side and can adjust upward.

Still, given where 4Front Ventures is currently, if there is a move upward to the target price, this is approximately 200% upside potential.  This is far from the highest upside opportunity of the most undervalued cannabis stocks.

I will continually be updating the FFNTF stock forecast as well as showing how this growth stock transitions into a value investment with significant upside potential.

Is 4Front Ventures FFNTF Stock A Good Investment?

4Front Ventures FFNTF Stock Chart 18Oct22

As I have mentioned above, my FFNTF stock forecast is probably very low considering the potential upside growth for 4Front Ventures.  The cannabis industry is just on the cusp of cannabis federal legalization and, this is very likely to bring in a lot of attention to cannabis stocks in general; FFNTF stock will likely do very well from this.

As these growth stocks transition into value investments, as we get more and more of costs & profits with increased economies of scale, we will know more and have a better idea of where FFNTF stock can go.  But, I expect it is only upward.

4Front Ventures, FFNTF stock, Value Investing & Growth Stocks

Cannabis stocks have been hammered because of the lack of support from a federal legalization framework and the opportunity of the masses to really participate in owning cannabis stocks as a long term investment.

I think FFNTF stock is a perfect example of a company that is diligently executing on their plan with a product that is in high demand.  The foundation that 4Front Ventures is laying will reap big rewards for those that can see through all of the issues regarding investing in cannabis stocks at the moment.

When we get cannabis federal legalization, and when these stocks up-list to Nasdaq, that is when major players will enter looking for high growth rates in a value investment opportunity.

The question then becomes: Do you want to buy a stock before these big players get in?  Or, after, when they have already picked the stocks up off of the floor?

I’m all in on cannabis stocks.

Company Financial Data

4Front Ventures FFNTF Stock Financial Statements

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