MedMen MMNFF Stock Forecast & Analysis

MedMen Enterprises MMNFF Stock is a stock that on many occasions I have wondered if they will make it; let alone if MMNFF stock is a good investment.  As far as cannabis investments go, this one is a face plant.  That is largely owed to excessive spending by previous management.  Now, the company is fighting for its life.  But, a lifeline has been extended.  MedMen has received ample cash; MedMen has recently done two capital raises; one for $10M and then another for $100M.  And, the dispensary company is also looking to sell some of its assets.  However, not all deals are going through, such as the Ascend Wellness deal.

My thinking here is that eventually, Tilray, who just acquired all of the senior debt, is likely to acquire all of MedMen in order to get the footprint of so many dispensaries.  While Tilray will have to carry a ton of debt relative to what they get, they forego having to start dispensaries from scratch.  With ample access to cash, and is the holder of the debt – acquired at a discount – they are in a position to capitalize in the future.

So, if you are a “bag holder” of MedMen MMNFF stock, what does one do?

Getting Tilray stock I think is the best avenue out of this.  Tilray is a company that has potential.  For now, let’s evaluate the future of MedMen.

MedMen MMNFF Financial Data

Here is a breakdown of MedMen financial data.

MedMen Gross Profits

At 45%, gross margins are not the worst on the planet.  Many vertical companies have achieved better margins.  This makes me wonder the wisdom of not being vertical on some capacity whereas as a dispensary you favor sales of your own brands and carry other products to merely round out your individual offerings.  However, I have not seen any scientific analysis as to this validity.  MedMen is an outlier in that previous management was exorbitant in its expenses thinking that sales would simply over power costs.  That did not happen.  Those individuals are far removed from the company.

But, with a potential Tilray acquisition, MedMen could be a solid launching pad for better sales and higher margins, should that take place.  In the meantime, at 45%, this is about 20% below where a dispensary, or a vertically integrated company, could be; there is a lot of room for improvement.

MedMen Operating Profits

Whereas last quarter there was a significant decrease in operating costs relative to revenue, that just got wiped out this quarter.  MedMen is spending 110% of revenues to run the show from the back office.  For perspective, the best companies are sitting about 30% – 35% (Since this is a ratio, you want the lowest possible number).  There is no route to profitability with costs exceeding revenues at that size.

While it is still speculative, at this point, a move by Tilray into MedMen would likely mean significant cost slashings.  And, with the potential of Tilray moving into the US market on a large scale, being able to utilize all of the licenses in all of the states that MedMen has, going vertical across the board, could mean cost savings as well as a full-scale ramp-up of production and revenue in the states that MedMen services.  But, and as I have mentioned, this is still speculative.  I just do not see why Tilray would want to own all of the senior secured debt unless they intended on acquiring the entire company.  So, putting the pieces together makes sense.

In the meantime, on a stand-alone basis, MedMen has a long way to go in achieving profitability.  This is the biggest obstacle, operating costs relative to revenue.

MedMen EBITDA & Net Profits

Here is yet another example as to where last quarter’s results could have been the start of getting closer to both EBITDA profitability as well as net earnings profitability.  That was a fleeting dream.  In order to get to profitability, MedMen will need to ramp up its presence in a consolidated fashion, working toward being highly productive in a few areas versus a small presence in many areas.

In the meantime, MedMen is a long way away from profits.  EBITDA is still negative for a company that has been around for several years.

MedMen Cash On Hand

As mentioned, MedMen went through a cash raise not long ago and, this has enabled the company to survive for some time.  But, the cash burn rate means MedMen is going to have to move forward with its selling of assets along with consolidation and restructuring.

MedMen Total Equity

Upside down.  It is as simple as that and, until there is a continued restructuring of the entire company, MedMen will be looking to raise more and more cash.  That will add to debt more and more, creating a company that is even further gone.

In order to be successful, a company needs to have an optimal number of dispensaries in any one enclosed state along with a grow facility.  And, there needs to be an optimal number of other dispensaries that carry a company’s products throughout the state and is distributed accordingly.  In MedMen’s case, they are not positioned to capitalize on this and that is yet one more reason they have faltered across the board.

MedMen MMNFF Stock Forecast

For me to put together a stock forecast via a Discounted Cash Flow Calculator, a company needs to be at least EBITDA profitable, or I need to be able to see that pathway.

I have no idea how MedMen gets there on its own.

Is MedMen MMNFF Stock A Good Investment?

Is MMNFF stock a good investment?  In theory, probably not at all at this point, nor in the beginning, either.  As I have just stated, vertical companies with multiple dispensaries and a wide distribution network in any one state is the optimal method for success.  Instead, MedMen’s business plan was to be the biggest dispensary system.  You lose control of margins in this fashion as so many successful cannabis companies have shown.  Not only does a cannabis company need to be fully vertical, but a company needs multiple dispensaries and, a company needs to have many other dispensaries that they distribute to.  MedMen’s margins are limited and they are simply spread out too far across too many states.

The possibility of Tilray coming in and incorporating the businesses into its own, and expanding more vertically, while extending sales to other dispensaries is intriguing, and something I think is a high-probability event.  That is the way out for MedMen shareholders.  And, getting in to Tilray is not a bad thing at all; I am warming up nicely to the company.

MedMen MMNFF Stock Financial Data

MedMen MMNFF stock Financial Data