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Schwazze SHWZ Stock Forecast & Analysis

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D. H. Taylor
(@dhtaylor)
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Schwazze SHWZ stock is a cannabis stock that will light up the board when cannabis stocks take off.  And, SHWZ is on of the best cannabis stocks - My Top pIcks.  I wanted to solidify the SHWZ stock forecast because the company has expanded so much, so rapidly over the past several months.  Right now, Schwazze has some 29 dispensaries but, they should close on an additional 10 more this year. That being said, the SHWZ stock forecast will be obsolete immediately as more revenue potential shows up quickly.

I will continue to update SHWZ stock forecast as the quarters progress; something I have been getting far more efficient at over the past few weeks and months.  That being said, I want to reiterate that these models are exactly that, models.  Investing is also a popularity contest.  And, just as equally that cannabis stocks can be unpopular and undervalued, very soon I expect that these same cannabis stocks will be over-popular and over valued.  Do the math accordingly with the SHWZ stock forecast.

Now, let’s dig into even more big opportunities:


   
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Q Canna
(@aconceptsketchgmail-com)
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Mj Biz article Featuring SHWZ pg 38 - 40

https://mjbizdaily.com/digital-issues/august-2022/


   
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Q Canna
(@aconceptsketchgmail-com)
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RS: I think "Survive and Advance" is a nice kind of guide for any cannabis company, right? It's like these, these years of pain and then hopefully we'll get some advancement.

JB: Yes, I think so. And I think, I think it's a, now is the time when that could come and it's probably better than the phrase that I used on our last podcast, which I actually think you guys used for a title that I've gotten some beef for, is I think, I said the earnings results shouldn't matter. And I think that people kind of thought I was being too flippant or something of that nature.

But yes, I do think we're still in a, some of these markets that Survive and Advance kind of characteristics. And but, I guess you can prove that there are ways to Survive and Advance and actually thrive in some challenging markets. You look at, amongst the kind of names that I'm frequently pushing, Schwazze is one that's proving out right now that you could say that make the same case that Colorado is so challenged and Colorado is a hard market, and here's a company that just threw good old fashioned boots on the ground. Execution is carving out a nice profit for themselves, generating money and doing well.

And, ultimately will either expand; they have expanded in New Mexico, but ultimately will expand further and scale up or will be a takeout. And either way that's a, probably presents a really interesting and solid outcome for investors in it. So, there is even in a state that's very challenging, there is a pathway to kind of differentiate itself and then the other option is kind of that Survive and Advance mentality.

https://seekingalpha.com/article/4531453-cannabis-micromacro-picture-podcast-transcript


   
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D. H. Taylor
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I kind of agree with some of these things.  I also agree that I think Schwazze gets acquired by someone very big who would want to dominate Colorado & New Mexico.  None of the big MSOs are really in these areas on a large scale.  This is easy to see why SHWZ is a M&A target.  This goes along with my broader thesis that there will be lots and lots of M&A activity and that the eventuality is that there is a lot of carving and merging.  Eventually, the biggest will be left standing.  


   
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Q Canna
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Schwazze is proving right now it can be done without being a huge MSO in a limited Lic MRKT , Colorado has way to many Lic out there and is a hard market, Its old school  with  good old fashioned boots on the ground. they are  executing and creating a profit , Lowell could learn from Schwazze techniques and perhaps thats the better merger than another boring/ price share killing Bloated MSO taking over 


   
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Q Canna
(@aconceptsketchgmail-com)
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We need is some positive press …..Shwz is doing their part

Q 2 Revenue Increases to $44.3 Million

Adjusted EBITDA of $15 Million

9 million dollars PROFIT on Operations , seems to me they are doing great but no one talks about them?

Like many other reports and mso's

Revised Guidance Driven by Short-Term, Challenging Colorado Market Conditions

Q4 2022 Projected Revenue Annualized Run Rate: $175 Million - $200 Million

Q4 2022 Projected Adjusted EBITDA Annualized Run Rate: $60 Million - $72 Million

IMPORTANT TO NOTE: Nancy Huber "Despite difficult market conditions in Colorado, which we believe to be transitory and temporary. "

Previous:

Q4 2022 Projected Revenue Annualized Run Rate of Approximately $220 Million - $260 Million

Q4 2022 Projected Adjusted EBITDA Annualized Run Rate of Approximately $70 Million - $82 Million


   
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Q Canna
(@aconceptsketchgmail-com)
Estimable Member
Joined: 2 months ago
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Q2 2022 Financial Summary:

Revenues of $44.3 million increased 44% compared to $30.7 million in second quarter ended June 30, 2021 ("Q2 2021")

Retail sales were $38.1 million up 77% when compared to Q2 2021

Gross Margin of $25.2 million was up 69% compared to $14.9 million in Q2 2021, this quarter was affected by $0.2M in purchase accounting

Net Income was $33.8 million compared to a Net Income of $4.4 million for the same period last year

Adjusted EBITDA of $15 million was 33.9% of revenue, compared to $10 million for the same period last year

Colorado two year stacked IDs for Q2 2022 compared to Q2 2021 and Q2 2020 for same store sales(1) were 1.8% and one year IDs(1) were (12.7%) comparing Q2 2022 to Q2 2021

Average basket size (1) for Q2 2022 was $59.98 down 4.1% compared to Q2 2021

Recorded customer visits (1) for Q2 2022 totaled 444,771 down 8.9%, compared to Q2 2021

New Mexico two year stacked IDs for Q2 2022 compared to Q2 2021 and Q2 2020 for same store sales(1) were 41.0% and one year IDs(1) were 30.4% comparing Q2 2022 to Q2 2021

Average basket size (1) for Q2 2022 was $54.56 down 12.7% compared to Q2 2021

Recorded customer visits (1) for Q2 2022 totaled 209,591 up 49.4%, compared to Q2 2021

Accomplishments

Since December 2021, Schwazze has closed acquisitions adding 15 cannabis dispensaries, 10 in New Mexico and five in Colorado as well as four cultivation facilities in New Mexico and one in Colorado and one manufacturing asset in New Mexico.

Closed Acquisition of Urban Health & Wellness Assets

Listed Common Stock on the NEO Exchange

Closed Acquisition of Brow 2 LLC Assets

Closed Acquisition of Emerald Fields

Added President of New Mexico Division

Closed New Mexico Acquisition, Becoming a Regionally Focused MSO

Added to Key Senior Leadership Team

Closed Acquisition of Drift Assets

Justin Dye, Chairman and CEO of Schwazze stated, "Similar to the rest of the country, the cannabis industry in Colorado is also experiencing a slowdown in growth compared to the last couple of years. Schwazze, however, is demonstrating that our regional strategy, built on a customer first approach, developing significant scale, building brands and leveraging data analytics and technology is not only sound but gaining momentum as demonstrated by revenue and unit sales growth, customer loyalty and by once again outpacing the legacy market growth by approximately 12%. We believe this model will travel well to other states as we find attractive opportunities. Despite share price weakness driven by broader market influences, we remain bullish on our business and have conviction that as Schwazze continues to deliver superior operating results that our shareholders will be rewarded."

Justin continued, "As we look to the future, we expect continued growth in Colorado and New Mexico through both organic and inorganic means. Our operations continue to mature and gain momentum, and we firmly believe that we are winning in our markets. Our team will continue to focus on growing profitably and generating cash flow from operations. When positive federal legislation is passed, Schwazze will be well-positioned as a market leader to take advantage of banking services and institutional investment."

Q2 2022 Revenue

Revenues for the three months ended June 30, 2022, totaled $44.3 million, including (i) retail sales of $38.1 million (ii) wholesale sales of $6.1 million and (iii) other operating revenues of $43,750, compared to revenues of $30.7 million, including (i) retail sales of $21.5 million, (ii) wholesale of $9.2 million, and (iii) other operating revenues of $16,844 during the three months ended June 30, 2021, representing an increase of $13.5 million or 44%. This increase was due to increased sale of our products as well as execution of our growth through acquisition initiatives. In the second quarter of 2022, the Company acquired one additional retail dispensary, which generated additional retail revenue. Additionally, recreational marijuana sales became legal in New Mexico in April 2022, which increased sales volume and revenues in New Mexico. Wholesale revenues in Colorado decreased due to increased cultivation capacity in the state resulting in an over-supply of wholesale cannabis materials.

Cost of goods and services for the three months ended June 30, 2022, totaled $19.1 million compared to cost of services of $15.8 million during the three months ended June 30, 2021, representing an increase of $3.3 million or 21%. The increase in cost of goods is driven by the increase in revenue, however not at the same rate. In the quarter, the Company experienced a reduction in costs driven by vertical integration and third-party price negotiations.

Gross profit increased to $25.2 million for Q2 2022 compared to $14.9 million during the same period in 2021. Gross profit margin increased as a percentage of revenue from 48.5% to 56.8%, and net of purchase accounting, the gross margin increased to 57.4%. This positive result, net of purchase accounting continues to reflect our consolidated purchasing approach, the implementation of our retail playbook, and vertical product sales in New Mexico.

Operating expenses for the three months ended June 30, 2022, totaled $16.1 million, compared to operating expenses of $10.5 million during the three months ended June 30, 2021, representing an increase of $5.6 million or 54%. This increase is due to increased selling, general and administrative expenses, professional service fees, salaries, benefits, and related employment costs driven by growth from acquisitions.

Other income for the three months ended June 30, 2022, totaled $29.2 million compared to $0.2 million during the three months ended June 30, 2021, representing an increase in income of $29 million or 18,435%. The increase in other income is due to the revaluation of the derivative liability related to the Investor Notes, offset by higher interest payments.

The Company generated net income for the three months ended June 30, 2022, of $33.8 million, compared to net income of $4.4 million for the three months ended June 30, 2021.

Adjusted EBITDA for Q2 2022 was $15 million representing 33.9% of revenue, compared to $10 million and 32.6% of revenue for the same period last year. This is derived from Operating Income and adjusting one-time expenses, merger and acquisition and capital raising costs, non-cash related compensation costs, and depreciation and amortization. See the financial table for Adjusted EBITDA below adjustment for details. 

For six months ending June 30, 2022, the Company used cash for operations of ($8.0) million compared to generating cash of $1.4 million for the same period in 2021. The Company has cash and cash equivalents of $33.9 million at the end of Q2 2022. 

Nancy Huber, CFO for Schwazze commented, "During Q2 we focused on completing integration of our acquisitions and made sure that we used our resources effectively. We are focused on reducing operating and SG&A expenses and judiciously investing growth capital to ensure adequate liquidity and profitability despite difficult market conditions in Colorado, which we believe to be transitory and temporary. Our balance sheet remains strong, and we have ample liquidity. We are focused on delivering positive cash flow net of acquisition costs for the year while driving organic growth and making smart acquisitions."

2022 Guidance

The Company has revised its guidance for a fourth-quarter 2022 (Q4 2022) annualized run rate, which excludes transactions that are announced but not closed. Q4 2022 revenue annualized run rate is projected to be $175 million to $200 million, and the Q4 2022 adjusted EBITDA annualized run rate is projected to be from $60 million to $72 million. 


   
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Q Canna
(@aconceptsketchgmail-com)
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Joined: 2 months ago
Posts: 160
 

Lets take the reported 2nd  quarter revenue and it stays the same Q3 and Q4. Shwz will be at the lower end of it's year ending revised guidance of $175 to $200 million,  This is with zero  growth the rest of the year!

If we are slightly optimistic  and growth is a paltry 4% to 6% the rest of the year and add no stores , That would still increase the year's sales enough to make  $SHWZ land in the middle of the revised guidance

We still have a couple New Mexico stores opening soon, & a few acquisitions in Colorado , We also have the new partnership with lowell farms of which i dont expect much as there are only carrying the 3 pre-rolls and nothing to do with the lowell 35's. Plus who knows what other stores we buy in Colorado . Justin Dye said there are 600 stores and we are only 23 so there is plenty of room to grow there 

In theory we wrap up 2022 closer to the upper end of guidance $175 to $200 million


   
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Q Canna
(@aconceptsketchgmail-com)
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Joined: 2 months ago
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#1
 #1
(@cannabisinvesting69yahoo-com)
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  Short sellers sure had Moxy yesterday, shorting over 78% of SHWZ shares. I wonder if they are covering today, or buying even more(?) 

Date Close High Low Volume Short Volume % of Vol Shorted
Aug 11 NA NA NA 78,274 61,194 78.18

 

Schwazze Q2 Revenue Grows 44% YoY, What About Profit? (msn.com)


   
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D. H. Taylor
(@dhtaylor)
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@aconceptsketchgmail-com 

I think this is the better approach, being the best in one area versus expending a tremendous amount of energy opening up in new markets all over the place.  It is expensive to get into a new state with licensing.  I get that cannabis companies want to be everywhere.  But, being the absolute best in one location versus middle-ground in multiple areas seems counter-intuitive.  

In the meantime, Schwazze needs to improve on its metrics a bit.  Gross margins need to inch higher.  They are almost there with operating efficiencies (one of the benefits of only being in one area).  Then, as they gain even more market share in these areas their fixed costs get paid for more and more with increasing units sold at new dispensaries.  This improves gross margins.  Then, SHWZ is poised to be a leader; albeit from a smaller base.

Nice pop up in the chart this morning!


   
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Q Canna
(@aconceptsketchgmail-com)
Estimable Member
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Viridian Capital 

price target $3.20

August 12, 2022: Schwazze reported Q2/22 revenues of $44M and $15M adjusted EBITDA. Revenues came in slightly below our $45M forecast while the adjusted EBITDA exceeded our $12M estimate on higher than anticipated gross margin particularly for the New Mexico business. The gross margin beat offset some higher OPEX spending in the quarter that appears to have been associated with acquisitions and will be non-recurring. We continue to anticipate declining OPEX spending for the remainder of the year as Schwazze management implements stringent discipline with acquired businesses in both Colorado and New Mexico.
 
With the earnings report, management provided an update to the previously discussed Q4/22 annualized run rate guidance for revenues and adjusted EBITDA. The company lowered expectations to reflect a Q4/22 run rate of between $175M and $200M in revenues and adjusted EBITDA in the range of $60M to $72M. This is below prior forecasts of $220M and $260M in revenues and adjusted EBITDA in the range of $70M to $82M. The cut to guidance is primarily attributed to worse than expected wholesale pricing and some slower than expected growth in Colorado as well as the push off of some new retail contributions in New Mexico which now look more likely to come online with full contribution in early 2023. Importantly, within the guidance cut, Schwazze is actually picking up margins at the mid-point (anticipated adjusted EBITDA margin going from ~32% to 35%) despite a likely gross margin hit on the challenged pricing environment and the company remains on track to be cash flow positive for the year net of acquisitions. The scaling margins and continued cash generation with existing assets in the face of market pressure reflects the ability of management to still take costs out from acquired businesses without sacrificing growth. We continue to expect this ability will bear fruit as the company gains further share in Colorado and New Mexico and as Schwazze eventually expands into additional markets. We are confident that market expansion is coming soon and continue to expect the most likely states for expansion will be Arizona, California, Nevada or Texas.
 
We update our model to reflect the guidance cut for Q4 while our 2023 forecast is largely unchanged. Our rating remains Buy and our price target $3.20 as we view Schwazze as one of the more underappreciated operators in the space and a worthy candidate for greater consideration.
Investment Highlights:
  • Q2 EBITDA Beat.
  • Q4 Run Rate Guidance Down on CO market Headwinds but Reflects Improved Margins on Cost Cuts.
  • Schwazze remains one of fastest revenue growers in US cannabis. Expect growth to continue while margin upside will come with scale and vertical integration.
  • Capitalized for additional M&A in the near term. Believe company a likely partner of choice for sellers and expect a takeout is in play.
  • Largest operator in Colorado and Early leader in New Mexico following state’s April rec market opening..  
  • Stock remains undervalued despite favorable fundamentals.

   
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Q Canna
(@aconceptsketchgmail-com)
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Revenue forecast


   
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Q Canna
(@aconceptsketchgmail-com)
Estimable Member
Joined: 2 months ago
Posts: 160
 

Unlike most other top growth stories in the space, growth for Schwazze is not dependent on the integration of any large assets or looming legislation catalyst that could ultimately be delayed through factors outside management’s control. Schwazze growth is about enhancing efficiencies in operation and gaining customers within existing markets.


   
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Q Canna
(@aconceptsketchgmail-com)
Estimable Member
Joined: 2 months ago
Posts: 160
 

Wow , i guess the market finally found SHWZ ,,,volumn only 100 k but now trading @1.38

This post was modified 2 months ago by Q Canna

   
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