Planet 13 Holdings (OTC: PLNH), a multi-state cannabis operator, has faced challenges in the market recently, causing its stock to lag behind its peers by 55% this quarter. Senior analyst Pablo Zuanic attributes this decline to a poorly timed equity offering and alleged embezzlement issues within the company.
Despite these setbacks, Planet 13’s stock is trading at a 35% discount, with a valuation of 1.1x 2024 sales, lower than the industry average of 1.7x. Zuanic sees potential for the company, especially with looming market opportunities in Florida. Planet 13 is recognized as a retail leader in Nevada with a scalable superstore model, positioning it for growth if Florida legalizes cannabis.
In a legal tussle within the cannabis sector, Planet 13 Holdings has filed a $16.5 million lawsuit against Casa Verde Capital, co-founded by Snoop Dogg and El Capitan Advisors, for alleged fraud. The lawsuit accuses both firms of deceitfully promoting their cannabis investment success to attract clients, including Planet 13. Planet 13 aims to recover lost funds and seek damages from Casa Verde and El Capitan.
Financially, the company saw a decrease in total sales in the fourth quarter of 2023, with notable declines in Nevada and California. However, improvements in gross margins and a reduction in cash SGA have led to a more favorable EBITDA margin, signaling improved profitability and financial health for the company.
Strategically, Planet 13’s acquisition of VidaCann and capital raises for expansion demonstrate its commitment to growth. The company is also evaluating tax positions to potentially reclaim millions in overpaid taxes. The acquisition of VidaCann positions Planet 13 to capitalize on the Florida market and expand its store network significantly.
Market opportunities in Florida present a significant growth potential for Planet 13. The company’s strategy to bring new brands and practices to VidaCann stores and expand its store network highlights its commitment to capturing a larger market share in the state.
Despite recent challenges, Planet 13’s proforma valuation reveals a substantial discount compared to the sector average. With a proforma net cash of $33 million and a stock price of $0.56, the company trades at 1.1x its projected 2024 sales, a 35% discount compared to the industry average. This undervaluation highlights the potential for growth and investment opportunities in Planet 13 Holdings.
Overall, despite recent setbacks, Planet 13 Holdings shows promise for future growth and profitability, especially with strategic acquisitions and market opportunities on the horizon. Investors looking for undervalued stocks in the cannabis sector may find potential in Planet 13’s discounted valuation and growth prospects.
