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SHWZ just bought 2 more location in Co
Perspective on the new Washington Park location
Schwazze marketing executive pinpoints brand identity
NOBLE CAPITAL 09/16/2022
Expanding in Colorado
Another Acquisition. Wednesday, Schwazze announced the Company has signed definitive documents to acquire certain assets of Lightshade Labs LLC, which contains two dispensaries located at 503 Havana St. in Aurora and 2215 E. Mississippi Ave. in Denver’s vibrant Washington Park neighborhood, which includes the University of Denver. The proposed acquisition is for $2.75 million in cash with an expected closing in the first quarter of 2023. Operating financials were not provided
The Dispensaries. Both dispensaries are highly rated by Leafly and Weedmaps, with the Aurora location receiving 4.9 out of 5.0 ratings from each and the Washington Park store
receiving 4.9 and 4.3 scores. With Schwazze already operating dispensaries about 2 miles away from each location, the acquisitions continue to fill-in existing white space on the map, in our view.
Detail on Lightshade Labs. Founded in 2011, Lightshade Labs has opened 11 dispensaries in the Denver area of Colorado, with 8 being in Denver, 2 in Aurora, and 1 in Federal Heights. The Company also owns several growing facilities, according to press reports. The company markets flower, concentrates, edibles, pre-rolls, tinctures, and vapes among other products.
Continuing to Build. The acquisition will bring Schwazze's total Colorado dispensaries to 25
once closed, and will bring the total amount of dispensaries to 35, along with 7 cultivation facilities and 2 manufacturing assets in New Mexico and Colorado. Schwazze is continuing to
build on the goal on deeper market penetration through the acquisition, and we believe that the Company will continue to expand on the goal with New Mexico
Maintaining Outperform. We are maintaining our Outperform rating and $4.00 twelve month price target. At our price target, SHWZ shares would trade at 14x projected 2022 adjusted EBITDA, a premium to the peer group's 11.5x but warranted given our expectations for faster
growth at Schwazze.
Joe Gomes, Senior Research Analyst
Joshua Zoepfel, Research Associate - firstname.lastname@example.org
Noble Capital Markets, Inc.
Trading: (561) 998-5489 Sales: (561) 998-5491
@aconceptsketchgmail-com I went to University of Denver. Let me tell you... a different kind of student there than, say, UNM. DU students are a bit higher caliber. DU is considered the Harvard of the Midwest. But, the entire neighborhood will be able to support these stores. Wash Park is a bustling neighborhood with a up-and-coming community. Lots of cross traffic in the neighborhoods. Should do fine over the years.
Shwz Going Deep is no BS , the newly renovated Starbuds Glendale is 1.9 miles to the north and another Starbuds 1640 E Evans Ave, Denver is 1.8 miles to the south
A quick goggle search on the Light Shade Location at 2215 e mississippi ave denver co , and it pulls up a very sellable asset location wise and quality of the dispensaries interior is very high end. Interesting to note that it is above a beautifully decked out Garden Restauraunt . It's surrounded by a super posh Retail/Restaurant/Spa District.
That strip mall is where the students hang out as there is a coffee shop just three doors down with Starbucks across the street... Evans bisects the University and is a fairly major street in Denver. But, I really do not see DU students lining up there. They are a completely different type of crew. Nonetheless, there is a Safeway grocery store just three more blocks away and many other major retail destinations along that area that service the neighborhood. That neighborhood absolutely has the clientele that would be regularly looking for quality product. This is a pretty good location.
Buying any cannabis stock right now means you buying at or near 52 week lows or ATL's.
From a real estate perspective SHWZ is like buying the worst house in a great neighborhood . The Colorado Cannabis trade gets knocked because all most people do is parrot the industry mouth pieces . Most people overlook the good stuff , they just glance at the exterior and drive on . It takes a skilled buyer to see what potential SHWZ has in CO . At some point these type of buyers end up with the most equity over time as it doesnt take much before the entire neighborhood is awesome . and SHWZ owns 20% to 25% of it 25 dispensaries , approx 75 more to go, 100 dispensaries coming up
Building a defensible market by” Going Deep”
The following is part of the transcript from SHWZ ceo Justin Dye recent interview ;
(In regards to the top 5 MSO’s) There seems to be a lot of support for other companies and what they're doing and the space more broadly so we'll see where that goes , and it feels like a massive inflection point is coming ( Big MSO’s to spread out ). If it does happen, it's just a waiting period. In the meantime we continue to look after the real estate that we've got and expand the footprint that we've got and make sure that it's that it's profitable it's it's all about getting to 100 Stores
Let's just take Colorado Colorado's roughly a 2.2 billion dollar uh addressable market for cannabis you know we are we're 120 million dollars in that state roughly yeah and so that's six percent I think we can certainly build a four to five hundred million dollar business with wholesale and with retail and branded products and services I think that's very achievable for us over time and continue to do what we're doing doing being really disciplined around Capital allocation how we invest our capex making sure we're getting good returns making sure we're doing the right acquisition deals continuing to broaden our product capabilities for wholesale and being able to offer that to the 630 stores that we don't own.
That's a huge opportunity because we can really make life easier for them if they want to stay independent and do their own thing that's great we can we can help them create value lower their costs make life easier for them to take care of those customers in towns where we're not in
I think in New Mexico we can build a couple hundred million dollar business down there it's a 400 million dollar total addressable market today it's going to a billion so I think we can easily build a market like that there with retail and wholesale and uh and then you you know then you've got other states out there as well
My goal my goal is build a great company that's different that has real energy behind it that is innovative that does the right thing and we're sticky with communities we're doing the right things what we're doing better to help our customers
At the end of the day when I go to sleep at night I feel good about that can it be a 1 billion dollar Revenue company could it be a 2 billion dollar Revenue company , We could buy somebody merge with someone and have it be much bigger than that down the road .
@aconceptsketchgmail-com These kinds of remarks echo a lot of my thinking. Stocks are down now. The economy is going to get flattened. But, look way, way down the road. You can see that these companies are building something for the future. The patient investor is going to really do well over many years.
Justin Dye CEO of SHWZ said " its a once in a lifetime oppotunity to create generational wealth " 36 minutes into town hall meeting
Notes from Townhall with Schwazze (10/11/22)
Schwazze still expects to be operating cash flow positive for the 2nd half of 2022 (excluding acquisition costs)
Each and all of Schwazze's dispensaries are profitable
EBITDA margins are in the mid-30%
The company has a new Distribution Center opening in Colorado which will cut costs substantially
Schwazze is always looking at cost efficiencies and layoffs/closures are not off the table
There are 137MM shares on a fully diluted a basis and ~190MM shares in total if you convert all debt and derivatives (this implies a market cap of around $228MM at $1.2 per share.
The company remains severely undervalued relative to its peers.
Schwazze will have 3 to 4 more stores opened by year-end (which implies 40 or 41 dispensaries in total by year-end across both Colorado and New Mexico).Two of them which are pending in New Mexico based on the corporated website for R. Greenleaf and the other one or two dispensariesare likely in Colorado.
Schwazze is beating the market by ~15% in the state of Colorado
The reason Schwazze is unable to brand the same name across all stores is due to a limited license agreement with Starbuds for the state of Texas
New Mexico is growing as planned or better
The home delivery program in Aurora is doing okay but not expanding much and there are no real plans for New Mexico at this time.
Justin Dye, the CEO of SHWZ, for the first time believes that the various efforts in Cannabis legislation (e.g., SAFE, More, Descheduling, Decriminalization) are more likely to happen in the near term than not. If it did, it could 3x the value of integrated players such as Schwazze.
The next aquisition for SHWZ will be big not a 1 or 2 store deal
SHWZ is not interested in Oklahoma as its next state due to the market competition
Texas was a market Justin Dye seemed keen on as a possibility (and unlikely his commentary on Oklahoma, he seemed excited about Texas)
The company has no plans for repurchasing shares as it views there are better opportunities for growth (both organic and inorganic)
@aconceptsketchgmail-com These are solid numbers with a strong foundation. Every single dispensary is profitable! Huge. This is one of those sleeper stocks that no one is paying attention to. But, once Biden reschedules cannabis, people will be scouring the world to see which stock will do the best. Schwazze is definitely one of them.
Passed the dispensary outside of UNM. Still not open. No signage as to when.
Fluff but worthy of a 1 min read , mentions SHWZ
Another pick on the other end of the size spectrum would be Vext Science (OTCMKTS:VEXTF).
This is a small company.
Its primary operations right now are in Arizona and secondarily in Ohio. Its margins are traditionally amongst the best in the industry as well, but because it’s a small company, it flies under the radar.
We think Vext is an inevitable acquisition target because Arizona is one of the few limited-license markets that does not cap the number of licenses any one company can own. And the MSOs are running out of room to acquire operations in a number of other limited-license markets, particularly in the East, and sooner or later Arizona is going to be one of the only states that they can buy more in.
And we think that makes Vext a worthy buy at this point.”
Nice read. I'd love to see Vext & Schwazze team up. That would be huge. And, no overlap. Vext is profitable. And, they are in Arizona (Plus, Ohio, but it is just getting started there and they focus on medical).