A recent acquisition gives this marijuana seller a licensed presence in 12 U.S. states through 85 retail stores, 17 cultivation facilities, and 15 production facilities. The company has a 7% share of the California market, although its losses have widened due to expanding costs.
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MEDMEN ENTERPRISES INC., $2.89, symbol MMEN on the Canadian Securities Exchange (Shares outstanding: 129.4 million; Market cap: $374.0 million; TSI Cannabis Quality Rating (CQR): ; www.medmen.com), is a U.S. cannabis retailer with operations in California, Arizona, Nevada, New York, and Florida.
The Canadian Securities Exchange (CSE), formerly the Canadian National Stock Exchange (CNSX), is one of our country’s alternative stock exchanges. You can trade CSE-listed stocks through your broker. You can also get stock quotes at www.thecse.com.
MedMen has its own line of cannabis products, sold under the brand names [statemade], LuxLyte, and MedMen. Its products take several forms: vape pens, drops, flower and pre-rolls. The company also classifies its cannabis by seven mood altering effects—from “max” to “zzz.”
In October 2018, MedMen agreed to acquire PharmaCann, a cannabis company licensed in eight states, for $682.0 million. Following that purchase, the company is licensed for 84 retail stores (35 currently operating), 17 cultivation facilities, and 15 production facilities across 12 states.
Approximately 68% of total revenue is now generated from retail operations in California. The company hopes to replicate its success there in other jurisdictions.
MedMen continues to aggressively buy retail locations and licenses. So far in 2019, in California alone, the company has acquired One Love Beach Club, a licensed dispensary located in Long Beach, for $13.0 million; Buddy’s Cannabis, which holds a microbusiness license in San Jose; and SugarLeaf Trading Co., an adult- and medical-use cannabis retail license holder in Seaside, for $3.0 million. In June 2019, the City of Pasadena awarded MedMen one of six licenses. The company now has a total of 14 retail licenses in California and 13 operating stores across the state.
Elsewhere in 2019, MedMen paid a total of $31.2 million to acquire Seven Point, a licensed medical cannabis dispensary located in the Chicago suburb of Oak Park, Illinois, and Level Up, an Arizona operation. That last purchase includes a 40% stake in top-selling brand K.I.N.D. Concentrates, which is currently distributed in over 90% of the dispensaries in Arizona. In addition, MedMen is licensed for three medical-use cannabis dispensaries in Arizona.
The company says it will open 15 new locations across the U.S. during the remainder of 2019. Of MedMen’s planned locations, 12 will be in Florida, where the company is licensed for up to 35 outlets.
In March 2019, MedMen secured a $250 million financing commitment from Gotham Green Partners, an investor in the global cannabis industry.
The company’s acquisition strategy has pushed up its revenue. In the quarter ended March 29, 2019, total revenue jumped 155.9%, to $36.6 million from $14.3 million, a year earlier. Meanwhile, losses widened to $23.7 million, or $0.20 a share, in the latest quarter, from $18.4 million, or $0.15. That reflects the continuing expansion of the company retail network and its supply chain.
MedMen ended the quarter with $21.9 million in cash.
The company is operating successfully in California where it has holds a roughly 7% share of the state’s $11 billion a year cannabis market. With the PharmaCann acquisition in place, and with financing arranged, MedMen now aims to replicate this success in other states.
There are currently 33 U.S. states that have already legalized medical use. About 11 of those, as well as the District of Columbia, have also embraced recreational consumption. It’s likely that the movement towards legalizing cannabis nationally in the U.S. will continue—driven by public opinion, demand from patients, and the industry’s experts and advocates.
Future expansion of the U.S. market—through individual states or federally—holds significant potential for sellers like MedMen.
Shares of many marijuana stocks may rebound and move higher as momentum traders buy the widely followed stocks on the latest upswing. However, considering their current sales, many Canadian producers have very high “market caps” (the value of all shares outstanding). That means they need huge revenue growth to even justify their current stock prices. If revenues merely hold steady or rise only slowly, their stock prices will be vulnerable.
This includes MedMen—although the gap between its market cap and its sales isn’t as big as it is for many of its competitors. The company’s more-established position in the marijuana field is also a plus. That could also make the company a potential takeover candidate. While that alone is not reason enough to buy the stock, it adds to MedMen’s appeal.
MedMen Enterprises has a 3-Leaf Cannabis Quality Rating (CQR). The stock is a speculative buy for aggressive investors who want exposure to the U.S. marijuana industry.
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