Lowell Farms LOWLF Stock is a stock that believe is one of the most undervalued cannabis stocks. What was once a $10.00 stock is now a fraction of this price at a mere $0.30 per share. But, I believe the intrinsic value hidden in this cannabis investment will eventually be there. Putting together the LOWLF stock forecast has me looking in to the future for the stock and what is possible. But, the biggest possibility is the Ascend Wellness AAWH stock licensing deal where Ascend will be producing & distributing Lowell Farms’ products throughout their dispensaries. So, when you consider Lowell Farms as one of your cannabis investments, you also need to consider its partnerships.
Lowell Farms’ numbers missed again, however. Revenues were expected to reach $16.5M but, Lowell only printed about $15M. For 2022, expectations are that more capacity will kick in and Lowell Farms will get closer to its potential. In 2023, revenues are expected to move to above $25M per quarter on average. However, with the Ascend Wellness deal, I am thinking there will be far greater upside with revenue potential.
In the meantime, Lowell Farms has greatly improved its financial position with shrinking its liabilities. Because of that, equity has surged. This will be the future engine of revenue growth.
Lowell Farms Video Analysis From December 2021:
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Lowell Farms & Wholesale Cannabis in California
There has been a complete collapse of wholesale cannabis in California. That is good news if you are a company that buys wholesale and produces your product with that, then dispenses it across the state. But, for the producers of wholesale flower and THC products, the impact is enormous and hits the bottom line across the state of many small players.
Wholesale prices range from state to state and generally range between $1,500 – $2,500 per pound. But, in California, there are some prices that are ranging between $200-$500; down from $800-$1,000 a year ago. Ouch. And with light-deprivation crops, prices are down to $600-$800 from about $1,500 the previous year.
Lowell Farms states they are approaching a cost price point of about $165-$200 from their greenhouse. So, that will keep them competitive. But, despite the ability to produce at such a great rate, there are likely double current supply levels than what the market can bear. So, this is likely going to be a long-term issue.
Premium Products & licensing
Lowell does not necessarily depend on wholesale product production. Lowell produces its own premium branding and that product development and revenue are continually improving. For the California market, Lowell will see continued increases in revenues and the shortfall from the wholesale drop will be made up from the higher margin-producing product of Lowell’s premium products
But, what I am also focusing on is the premium product licensing that has been going on over the past months. Lowell is licensing out its premium brand to Ascend who will grow, process, and distribute the Lowell brand throughout Mass & Illinois. To date, Ascend is having trouble producing enough products at optimal levels to keep up with demand. Good news, if you ask me.
Lowell will be working with Ascend in guiding them to produce at more optimal levels and with high volumes. The end result is that with almost no effort, Lowell Farms will be seeing increased revenues which will almost be entirely profits. From there, I expect more licensing in more states to capitalize across the nation on one of the best brands on the market with little up-front capital expenditures and almost pure cash flow thereafter.
Lowell Farms Financial Data
Lowell Farms Gross Profits
Revenues will move higher as assets are increasing at a far bigger rate than liabilities, especially as Lowell has just paid down liabilities. Plus, with Ascend deal, there will be increasing revenues from the licensing deal. And, there will be minimal costs from sales & marketing. This is what makes the deal such a winning deal as these licensing deals work themselves out.
Ascend will be able to produce more products in its production facilities optimizing its costs. Then, these products are sold in Ascends’ dispensaries. Lowell will benefit greatly from this; it is pure cash flow. So, this should start to show up in revenues.
In the meantime, when Lowell can start create increasing revenues from sales inside California is going to be an important deal for them. Lowell Farm’s reliance on wholesale is going to have to move toward more of its premium production.
This is how cost of goods will drop along with the increase in revenues.
Lowell Farms Operating Profits
Lowell has done a fairly solid job of maintaining its operating costs at lower levels. But, on a percentage basis, given the drop in revenue, obviously there was an increase in the operating efficiency metric as it is simple mathematics.
Had there been an increase of ~10% on revenue for the quarter and Lowell printed its $7M in operating costs this would have been 41% efficiency. This is elevated from where Lowell could be. But, with the increased costs revenues will increase from higher licensing sales and premium branding sales in California.
Lowell Farms EBITDA & Net Profits
Because of the drop in wholesale prices, and the subsequent drop in revenue to Lowell, EBITDA took a hit dropping from mere break-even to -53% of revenue.
I will continually iterate that the premium branding will continually provide the revenue and bottom line the company is seeking. The augmentation of wholesale as a revenue generator will be an added plus. And, with the licensing agreements for the premium branding, the continual building up of the branding will get Lowell to increase revenues on a consistent basis. And, with that, margins will improve.
Lowell Farms Cash On Hand
On a debt ratio basis, Lowell is sitting far better than it was just last quarter as they have paid down debt. This has driven the cash debt ratio upwards one of the more solid levels in the sector. This foundation puts Lowell Farms in a far more strategic position moving forward and this will give them a much better opportunity to build its position in the industry.
Lowell Farms Total Equity
With the debt paid down, total equity has doubled moving from approximately $61M to $112M. With increasing assets, this will allow Lowell to push forward with increasing revenue. Equity is the difference between assets & liabilities. If a company can drive its assets. up higher, while simultaneously keeping a lid on liabilities, the added assets, or equity, is what gives a company the ability to create revenue and push profits upward.
The big jump in assets is something I am keying in on. This is important and will drive the future of the company.
Lowell Farms LOWLF Stock Forecast
Lowell Farms LOWLF Stock Forecast DCF
LOWLF stock was once a $10.00 stock and I believe in the future the stock will get back above that price and far beyond. With licensing deals, Lowell does none of the work but, Ascend will distribute the product after production. So, this is pure cash flow to Lowell. And, once Lowell gets its metrics lined up with its own product base in California, there is an even bigger potential drive for LOWLF stock.
Is Lowell Farms LOWLF Stock a Good Investment?
Look towards the future. Then, when you look at LOWLF stock and the current price you see a solid opportunity. The longterm prospects of the cash flow from Ascend Wellness deal as well as ramping up the quality product in California.
The shakeout in California cannabis of wholesale prices will eventually benefit Lowell Farms. Given the potential of licensing one of the top-rated cannabis products will spread throughout the US and continue to add in income for Lowell with little input costs. So, the eventuality is that Lowell’s premium brand will contribute to bottom line in California. And, with time, the wholesale prices will shift.
Even still, Lowell is already producing its wholesale products at profitable levels. And, this will beat out the competition and the shakeout will inevitably lead to more California firms tapping out. Lowell has access to financial markets in ways that other smaller competitors do not have. Plus, the licensing of premium products will be a main driving factor for profits in the future.
When you look at Lowell Farms you need to look at the bigger picture. Once you do that, looking at the recent sell off, you see a solid opportunity to grab a longterm holding at very low ratios to future earnings. And, his will be a stock that eventually eclipses $4.00 giving n investor a 10x return. Plus, given enough time, LOWELF stock will push beyond $40.00 making this a 100x stock to hold for longterm investment.
Lowell Farms Financial Data
Lowell Farms LOWLF Stock Financial Statements
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