Item 9 Labs INLB stock is an AZ-based franchisor dispensary system. They have grow and processing operations and have also just signed deals expanding them into Maine, Michigan, New Jersey, South Dakota, and Virginia. Also, I have seen acquisitions in Colorado have recently made the news. Three things, first, AZ cannabis has been on fire, no pun intended, over the past few months. Second, INLB stock (OTC-traded) is pushing higher. Third, Item 9 Labs is reporting Q1 2022 earnings next week. I wanted to start collecting information on them because I have a feeling that the news will be good and INLB stock is going to pop higher. Given that, here is a quick breakdown of what I am looking at and what might happen with Item 9 Labs INLB stock next week.
With all of the deals signed lately, expect big gains in revenue through 2022 and into 2023. This will be a performer for a few years and investors entering now will be well rewarded for long-term plays.
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Item 9 Labs Financial Data
Here is a breakdown of Item 9 Labs INLB Q3 financial data.
Item 9 Labs Gross Profits
Revenues declined the previous quarter but, I am looking for revenues to pop up above the company’s previous high-mark. Should Item 9 labs clear the hurdle for $7.5M – $8.5M in revenue, the ~33% increase in revenue has the potential to add some $4M in gross profits. But, Item 9 Labs will need to improve efficiencies in processing cannabis in its facility. Should that occur, if gross margins can push higher, the bottom line will start to add plus signs.
Item 9 Labs Operating Profits
Whereas previously Item 9 Labs was vigilant in its operating efficiencies, the new deals signed meant for the expansion of the company. With increasing revenues on the way, the franchisee growth will help to pay the bills for the addition of operating costs.
Playing Item 9 Labs means a long-term play until the company grows further into its new structure. At the same time, the core, original business is close to hitting a profitable stride.
Item 9 Labs EBTIDA & Net Profits
With a lot of the costs for new dispensaries coming from franchisees, expansion costs are going to be minimal from a CapEx perspective. This will enable Item 9 Labs to focus on achieving cost efficiencies at its own grow facilities and achieve that all-too crucial EBITDA profitability level faster.
I have always been keen on the idea of franchisee dispensaries as a way to expand a cannabis business. I believe this is effective and the lower initial costs with small business owners pushing as hard and far as they could to achieve their own success is a recipe for continual growth and profits.
But, at the same time, having solid corporate backing helps in getting in other ways. For now, achieving the EBTIDA profitability level on its own will be a plus and the added revenue gains from franchisee sales of products will go far for Item 9 Labs.
Item 9 Labs Cash On Hand
From a debt perspective, Item 9 Labs will need to bring in cash. This is some of the lowest I have seen. Likely, debt financing will occur to pull the company through from where they are. There is plenty of opportunity for assets to be leveraged for some debt and shore up the cash position.
Item 9 Labs Total Equity
Total equity should move higher at a bigger rate as Item 9 Labs continues to expand its presence into 5 new states with dispensaries.
Item 9 Labs INLB Stock Forecast
I normally put together a Discounted Cash Flow Statement for companies, but for Item 9 labs, I will wait until they become consistently EBTIDA profitable. They are close and have had EBTIDA profitable quarters. When they consistently put together a solid string of data to rely upon, I will put together a DCFS and project the stock.
Also, Item 9 Labs, with the deals signed over the past few weeks, will be well-positioned to grow rapidly and, getting a handle on its potential may take time.
Is Item 9 Labs INLB Stock A Good Investment?
As I mentioned, I like the concept of franchisee dispensaries. It may be that having smaller owners cutting their teeth and doing everything necessary to get a piece of the cannabis pie is a good way for this to play out. This strategy allows the corporate to expend all of its energies into the grow facilities and be competitive there. Also, there are no limitations on the corporate owning its own dispensaries, so it is a marrying of both worlds.
The expansion into so many states will mean that there are significant costs ahead for new grow facilities if deals from other grow facilities are not used in the beginning. I am wondering on this particular strategy.
For now, I am focusing on the next earnings release and conference call. I am also submitting questions to management for the next conference call.
Item 9 Labs Financial Data
Item 9 Labs INLB Stock financial data
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3 thoughts on “Item 9 Labs INLB Stock Forecast & Analysis”
Many thanks for the write up on Item 9 labs since I own quite a few shares.
This might be something to keep an eye out if you own this stock.. There has been some inside selling for this stock.. Matter of fact, on the 30th of May, Michael Jennings sold around 27k shares on-market at roughly CA$2.38 per share. This was the largest sale by an insider in the last 3 months. Insiders have been net sellers, collectively disposing of CA$3.0m more than they bought in the last 12 months.
Thanks for pointing this out, Matt. Hmmm… don’t really like the idea that insiders are net sellers. I don’t know that we have enough information on this to say that they know something we do not. But, cannabis stocks are getting obliterated; we all know this. Maybe these guys are just adjusting their position. I like Item 9 Labs and think they have a workable plan that they can execute and grow. Will the stock head higher from here? Likely but, that is more because of the potential of where all cannabis stocks are at this point.