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Why This Is The Best MSO to Own Now



Source: Marijuana Moment

You’re reading a copy of this week’s edition of the New Cannabis Ventures weekly newsletter, which we have been publishing since October 2015. The newsletter includes unique insight to help our readers stay ahead of the curve as well as links to the week’s most important news.


This week, the second-to-last month of 2023 ended. As we detailed in two articles, cannabis stocks advanced in November, with the NCV Global Cannabis Stock Index rebounding after a massive loss in October. The rally extended on the first day of December, but the index is still down 17.5% in 2023 after collapsing more than 70% in 2022. Since the peak in 2021, it is down over 91%, though it is almost 18% above the all-time low set in late October.

The big story this year has been the potential rescheduling ahead for cannabis. It’s still not clear if this will actually take place as expected (from Schedule 1 to Schedule 3) or when it will take place, if so. The NCV American Cannabis Operator Index led the way higher in November, rallying 21.5%. It is up almost 43% since 8/29, the day before the potential rescheduling news broke, while the Global Cannabis Stock Index is up just 8%. Investors are excited about the MSO stocks, which are down a lot from their peaks and cheap compared to the past. They would benefit greatly from 280E going away.

We believe that the MSOs will keep rallying if the rescheduling happens but have been conveying our optimism for other types of stocks too. If rescheduling doesn’t take place, the MSOs could see substantial downside in our view. For investors who are looking for an MSO that has upside but less downside than peers, Planet 13 seems to be the best option.

Planet 13 is up 24.6% year-to-date, lifting off of an all-time low near the end of 2022, when it fell over 79%. In 2022, the American Cannabis Operator Index fell a bit less than Planet 13, declining almost 77%. It is up less in 2023, rising 14.4%. So, with similar price movements, what makes Planet 13 stand out relative to its peers?

Investors historically appreciated that the company was debt-free, which is still is, but its cash level has declined to $37 million as of the end of Q3. The balance sheet stands out relative to peers. Among the larger MSOs, Green Thumb Industries has the strongest balance sheet, but it showed $162 million of net debt at the end of the third quarter. We view the Planet 13 balance sheet as a large positive. Unlike its peers, the stock trades very close to tangible book value, currently at 1.53X. Most of the peers have almost no tangible book value or have liabilities that exceed tangible assets, which could be a big problem with respect to extending debt in the future. Green Thumb Industries, which among the larger companies has the lowest multiple, trades at 4.25X, a big premium to Planet 13.

So, the strong balance sheet of Planet 13 protects it from adverse resolution to the potential rescheduling. On the other hand, the stock could rally a lot if 280E goes away, though there are companies with shakier financials that could rally more. Still, we see a lot of growth potential at the company, which opens its Illinois dispensary this coming week. That store is near the Wisconsin border and could drive the financials higher. Also, the company will be opening its Florida stores and closing its Florida acquisition soon. Its California operations could do better. The company remains a leader in Nevada, which has been soft but could improve.

The company is much smaller than most of the other MSOs in that index. Perhaps because of this, it’s not widely covered by analysts. In fact, there is a single analyst providing estimates, and that analyst has no 2025 estimates currently. Looking at Planet 13 and the companies that are Tier 1 or Tier 2 MSOs, the stock does look a bit expensive on an enterprise value to projected 2024 adjusted EBITDA basis at 7.4X:

Planet 13 is not dirt cheap compared to peers on a cash-flow basis, but it is so from a balance sheet perspective. If 280E goes away, the MSO valuations should go up. It should drop less if 280E lives on.

As much as I like Planet 13 relative to its peers and own it in both of my model portfolios at 420 Investor, I do think that there is potential downside if 280E doesn’t go away. I continue to own large positions in a few Canadian LPs that trade below tangible book value. I also have exposure to ancillary companies that could benefit from having stronger customers financially if rescheduling does take place. These ancillary companies trade on the NASDAQ and appear to have less financial risk. Investors looking to invest in an MSO should consider Planet 13.

Like this newsletter? Sign up, and you will receive a free copy by email each Sunday morning. Each week, we share the top stories and write an original perspective as well.

New Cannabis Ventures publishes curated articles as well as exclusive news. Here is some of the most interesting business content from this week:


Global Cannabis Stock Index Bounces in November

MSOs Lead Cannabis Stocks Higher in November

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Alan & Joel



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