Making Marijuana Millionaires
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Q and A transript after Earnings call
Can you discuss the Colorado market and what the state of the market is at this point? And how Schwazze fits into that market?
Nirup Krishnamurthy
The Colorado market in terms of retail as the most of us know, is having a tough year. So, Colorado market as a whole was down 20% to 25% year-to-date. And it invested in cycling COVID and also in a tough economic environment. So, having said that, I'm very happy to note that we -- as in Schwazze outpacing the state by 12% once again this quarter.
We have had seven quarters in which we outpaced the state and we continue to do that. We apply our retail playbook, to run our retail operation. So, we have three main focus areas, one, we have the best assortment in our stores. to we are the highest quality products, and we want to be the best service possible to our customers.
So -- and I'll tell you this year, our suppliers and the supplier community have been very, very collaborative and have worked very closely with us to provide customers a great products at a good price, which has driven good volume, and our customers have remained loyal through this period. So Colorado is still a large market nearly $2 billion, and we will continue to cultivate that market, and we expect to continue to grow in this market to be the most admired cannabis company in Colorado.
Maybe one day this will say SHWZ
Albertsons is the second-largest traditional grocer in America, operating 2,276 stores under 24 banners in 34 states (as of the end of fiscal 2021). Around 75% of stores have pharmacies, while nearly 20% also sell fuel. Albertsons has a significant private-label operation, accounting for around 20% of sales (excluding fuel). While its own brand assortment is mainly manufactured by third parties, Albertsons operates 20 food production plants (as of the end of fiscal 2021). Albertsons is a top-two grocer in two thirds of its major markets (as of early 2022, according to company data), and virtually all of its sales come from the United States.
An undervalued stock ,
The three elements of an undervalued stock SHWZ
1. consistently profitable and has
2. attractive long-term growth prospects but whose
3. share price is cheap compared to many of its peers.
Such stocks (SHWZ) can be great options for patient buy-and-hold investors willing to wait for hidden bargains.
Although cannabis investors are always on alert for a good deal like SHWZ, it's important to remember that some stocks are “cheap” for a reason. It may be that a company's growth prospects have diminished, it's losing money, or it's losing business to new competitors. Whatever the reason, stocks like these (sometimes called “value traps”) are not considered undervalued even if they trade at very low prices.
Copied from Motley fool just added SHWZ and it all makes sense
Any question's for the Q3 conference call ?
@LowellFarms mascot sighting.
— George Allen (@G4Geronimo) October 31, 2022
What is your MSO’s mascot doing this Halloween? pic.twitter.com/pKZ4bYAqgc
Interesting perspective on tier 2 and 3 investments over bloated tier 1
https://mindsetvalue.substack.com/p/small-ball
Updated Dispensary Count:
— Cannalorian (@Cannalorian) November 8, 2022
- $AYRWF (FL 52nd)
- $CURLF (MD 4th)
- $AAWH (PA 1st)
- $SHWZ pending acquisition (CO 24th and 25th) https://t.co/oeaJsIaBQJ pic.twitter.com/SWSvUQIuXH
https://www.forbes.com/sites/willyakowicz/2022/11/03/how-the-cannabis-industry-can-begin-interstate-commerce--legally
I cant get past the paywall but if anyone can copy and repost please . Interstate is what Lowell needs
I dont recall reading this article in the last 2 weeks
https://www.abqjournal.com/2540437/supply-meets-demand.html
Legacy growers, new growers
Many legacy operators — those who operated in the medical cannabis industry prior to April this year — supply their own shelves. That includes places like Ultra Health, Pecos Valley Production and R. Greenleaf.
R. Greenleaf, which was acquired by Colorado-based company Schwazze earlier this year, has a full grow operation in Albuquerque that allows it to grow 20,000 plants, said Schwazze New Mexico Division Director Steve Pear. Pear said the company has been self-sustained on its own cannabis — both before recreational sales began and now.
The company did buy from the wholesale market before April to make sure they had enough cannabis to serve eager customers, but that was just for good measure.
R. Greenleaf is in the process of completing a new grow facility in Albuquerque to accommodate its expansion. The new facility, which is 40,000 square feet, is about halfway complete — and it includes six grow rooms equipped with state-of-the-art equipment.
The company has or plans on opening stores in Albuquerque, Los Lunas, Clovis and Ruidoso, Pear said. He’s confident the company will be at 17 retail locations by the end of the year and at 25 by next September. With the new grow, supply doesn’t seem to be an issue.
“We have had zero issues on the supply side from the flower perspective,” Pear said. “We have had to buy some trim on the market over the last, you know, four or five months but that will become less and less of a need as we build up our capacity. … We’ve been pretty self-sustained and that’s part of why our model works so well is (because) we’re able to take care of our own stores.”
Intersting graphic of potential bull run
I also think that if we're in a new sector bull run with a reopening of funding markets, the riskiest stuff could rally the most. But there may be better risk/reward away from co's operating in v tough states and in which ETFs have been sellers, not buyers https://t.co/N7j0396jb5
— LogicPrevails (@LogicPrevails_) October 26, 2022
A case for elimination of 280 e , Big Catalyst
How would a US plant-touching operation become immunized from 280E by issuing exchangeable shares to a foreign parent?
— LogicPrevails (@LogicPrevails_) October 26, 2022
The benefits stated by $CGC are accounting consolidation and operational synergies https://t.co/cefcwWyrIG
SHWZ Gonna suprise i think , Loaded some more recently ,,, Looking at beachouse designs that cant withstand 200 Mile per hour winds and 14 ft storm surge with my winnings .
ROTH
U.S. cannabis remains a compelling secular growth story: We remain bullish on the cannabis investment opportunity in the U.S., viewing the $70B+ U.S. illicit market as a material market conversion opportunity. We believe as the industry matures, pricing will compress naturally as access improves, bringing new consumers into the legal channels while production scale offsets margin pressure. We believe these stocks will trade in-line with CPG peers at -4.0x NTM EV/sales, with MSOS currently trading at a 50% discount at 2.0x. Cannabis legalization on both a state and federal level should accelerate as more U.S. states legalize (19 adult-use), forcing the eventual federal movement to open up U.S. operators to institutional capital and U.S. exchange uplistings.
STIFEL
The first clear pathway to uplisting for US MSOs. Since President Biden’s announcement, we have had GTII enter into an exclusive lease agreement with Alimentation Couche-Tard (ATD-TSX, covered by colleague Martin Landry) with its sole TSX listing and today’s WEED announcement providing a second regulatory data point. We believe the timing of these events are not a mere coincidence and suggests it is now easier to do business with US cannabis companies following the official favourable stance by the White House. Given WEED has discussed this arrangement with exchanges prior to today’s announcement, we would not be surprised to see US cannabis companies begin to explore similar structures to achieve an uplisting, representing a major re-rating opportunity given the potential for 1) increased liquidity, 2)
better custodian/prime brokerage opportunities and 3) greater access for retail and institutional investors. Opening the gates for strategics, potentially bidding up assets. We would also highlight managements’ apparent desire to continue
expanding its US footprint, which we have historically heard from other companies outside US cannabis seeking new growth opportunities. While at first glance, we see a direct avenue for WEED to increase its ownership in TER through Canopy USA to consolidate financials, we would not be surprised to see other strategics entering the US cannabis industry. This could cause asset price inflation, benefiting all
participants and highlight in particular CL with its ongoing asset divestiture process as part of the CCHW transaction. On the other hand, it would be imprudent not to recognize the potential for increased competition for those US MSOs that are seeking to grow through M&A such as TER and TRUL, in our view. Nevertheless, this must be taken into context with uplisting such that any potential drawback could potentially
be negated through a valuation gap that creates interesting valuation accretion dynami
Nice graphic from KEY Investment Partners showing how Big Alcohol trades at a much higher EV multiples, despite declining YoY growth rates compared to $MSOS. Of course, earnings quality/net profitability is greater but overall, alcohol sales are a no/low-growth biz going ⏩ pic.twitter.com/kvc5RsxNr5
— The Dales Report (@TheDalesReport) October 24, 2022
Jeffries on Canopy Growth and implications for Alt routes to uplist.
......while this could also have favorable implications with regard to MSO uplistings: If we do not see US reform near-tern that allows for uplisting of US MSOS, today's announcement shows there could be another way. Could MSOS put the US assets into a holding company under a parent company, also with ownership via non-voting shares? Canopy says it has cleared this structure with the necessary regulators/exchanges, so we see no reason why MSOS would not be allowed to do similar. Any additional capital raised by the US MSO parent from greater access to institutions as a result, could then be loaned to the US holding company as debt - we know lending ok from the perspective of the exchanges. Beyond MSOS, there could also now be an incentive for other Canadian LPs to do similar moves, potentially paving the way for more deals for US assets from these LPs.
Schwazee , may have the best Mngmnt team in Cannabis , At least in regards to the linked in profiles , The senior Leadership of which there are 13 profiles , half of them have an MBA . The pedigree is very reassuring as a hodlr of SHWZ stock. Of course the Executive leadership with JD at the top and Nirup Krishnamurthy as the new President , Todd Williams with the M&A experience at Alberstons .. It bodes well for the future growth of SHWZ
Found the exact words you had mentioned scam press release by GTI and Ben Kovler the CEO who tweeted out a cryptic " Strange things are afoot at the Circle K"...
This is why his board deserted him last week
One Analyst already tweeted out ,
"I think the headline is misleading. Couche-Tard can't and won't be touching the plant. It's a lease deal (they will lease space near their convenience stores to Green Thumb). Circle K won't be selling cannabis in any shape or form.
In Canada, Couche-Tard has a franchise agreement and is actually operating the Circle-K co-located Fire & Flower stores. That's a different proposition.
I think it shows the interest that Couche-Tard has in the space. It's an opportunity for them to learn about the traffic these stores will attract, how profitable are they, and how they impact Circle-K sales."
Thanks for the reply , i hit the paywall and couldnt read the full article
This is how quick the retail landscape can change in any state , theres 600 in florida and there starting with 10 , Green thumb only has 7 stores as it is ,, https://www.bloomberg.com/news/articles/2022-10-19/where-is-weed-sold-circle-k-gas-stations-in-florida-in-2023
I have seen more news on an unknown Nancy Huber stepping down as CFO then SHWZ getting any kudos or positive press for all the other parts . Its great news some one of the caliper of Nirup will serve as the company's president ,The former CIO of Amercian Airlines . We have an amazing team in place
I see this as very relevant for cannabis , it will bring attention to the investing space , its three weeks untill elections and all these states have recreational or medical Cannabis being voted in.
Weeks after election would be a good time to make an aquisition move in theory.
Arkansas
Maryland
Missouri
NorthDakota
Ohio
SouthDakota
Texas
Wisconsin
I clicked on the Fazow link and it showed lightshade hiring but , i decided to search for Schwazze and they have 6 Help wanted 1 day old adds plus 5 Jobs posted aprrox 7 days ago Plus 40 jobs posted within the last 30 days, There are countless more that were 30 days or older,,,These represents some serious growth , although im sure some are just simple attrition rate and are not growth related..
In states where the operations or the market itself is considered mature, valuations can be very, very attractive. For example, we recently initiated coverage of a company called Schwazze (OTCQX:SHWZ), and they operate in Colorado and New Mexico.
And Colorado is perhaps the closest thing to a mature cannabis that we have. So Colorado did over $2.2 billion in sales last year, but it is intensely competitive.
And combined with inflation and the impact on the consumer, we think Schwazze is very well positioned to acquire additional assets in a state like Colorado with little bidding competition.
So I’d say it does have an impact in as much as where you’re dealing with a more mature market, and you see pricing pressure on top of that, then the assets might be more attractively valued.
Does any body have access to the artcile behind the paywall
https://seekingalpha.com/article/4545977-impact-of-280e-on-mso-income
I just spoke with IR over at SHWZ , i actually called to get a copy of yesterdays Town Hall , but i asked whats up with Nancy and the reply was shes Retiring and spending time with her family
I have actually met her , she is really overweight ,odds are she most likley has some health issues , and besides when they asked her what the fully diluted shares were in the town hall she fumbled saying " i dont have the paperwork in front of me " and just rounded up the share count . She could be out of her league.
Jd said its a once in a lifetime oppotunity to create generational wealth 36 minutes into town hall meeting
Copied from redit shwz page
Posted by
u/Affectionate_Fox9101
Notes from Today's Townhall with Schwazze (10/11/22)
On today's Town Hall, we learned a few new things of importance (if you saw the call and wanted to add anything, feel free to do so in the comments and I will reincorporate them into the post):
Financial:
Schwazze still expects to be operating cash flow positive for the 2nd half of 2022 (excluding acquisition costs)
Each and all of Schwazze's dispensaries are profitable
EBITDA margins are in the mid-30%
The company has a new Distribution Center opening in Colorado which will cut costs substantially
Schwazze is always looking at cost efficiencies and layoffs/closures are not off the table
There are 137MM shares on a fully diluted a basis and ~190MM shares in total if you convert all debt and derivatives (this implies a market cap of around $228MM at $1.2 per share.
The company remains severely undervalued relative to its peers.
Operational:
Schwazze will have 3 to 4 more stores opened by year-end (which implies 40 or 41 dispensaries in total by year-end across both Colorado and New Mexico). Note: we are aware of least two of them which are pending in New Mexico based on the corporated website for R. Greenleaf and the other one or two dispensariesare likely in Colorado.
Schwazze is beating the market by ~15% in the state of Colorado
The reason Schwazze is unable to brand the same name across all stores is due to a limited license agreement with Starbuds for the state of Texas
New Mexico is growing as planned or better
The home delivery program in Aurora is doing okay but not expanding much and there are no real plans for New Mexico at this time.
Legislation:
Justin Dye, the CEO of SHWZ, for the first time believes that the various efforts in Cannabis legislation (e.g., SAFE, More, Descheduling, Decriminalization) are more likely to happen in the near term than not. If it did, it could 3x the value of integrated players such as Schwazze.
Strategically:
SHWZ is not interested in Oklahoma as its next state due to the market competition
Texas was a market Justin Dye seemed keen on as a possibility (and unlikely his commentary on Oklahoma, he seemed excited about Texas)
The company has no plans for repurchasing shares as it views there are better opportunities for growth (both organic and inorganic)
I signed up for that town hall via email but i guess i missed it ? is there a link to rewatch or listen , maybe a copy of the transcript ?
Im intrigued with the comment that the next aqusition will be a a big one not a 1-2 store add on
STIFEL GMP
INDUSTRY UPDATE October 6, 2022
White House actions could catalyze a secular cannabis bull market
Summary
POSITIVE In a surprise announcement, President Biden made three Executive Actions today surrounding cannabis pardons and initiating a review on cannabis scheduling. We believe this is the most important development in US cannabis history since the Cole Memo and could snowball into multiple industry tailwinds. The most near term impact could be passing the SAFE Act most likely through the NDAA in the lame duck session, which we believe has significantly improved chances of success. As a result, we see cannabis company shares having the potential to increase up to 3x from current levels in short order. Longer term, and dependent on scheduling outcomes, 280E could be addressed which we see as having the potential to improve operating cash flows by 50-250% for our companies under coverage. With midterms and REC ballot initiatives in MD and MO approaching, we could be on the cusp of a secular cannabis bull market.
Key Points
CLICK HERE FOR OFFICIAL WHITE HOUSE STATEMENT
President Biden to make good on his campaign promise. The White House announced three Executive Actions related to cannabis: 1) pardoning all prior Federal offenses of simple possession of marijuana; 2) urging all Governors to do the same with regard to state offenses; and 3) asking the Secretary of Health and Human Services and the Attorney General to initiate the administrative process to review expeditiously how marijuana is scheduled under federal law.
Increasing odds for SAFE, which could snowball to uplisting, more institutions and strategics entering the industry. We believe Pres. Biden's first two EA's address important social justice measures which have been the primary obstacle preventing the SAFE Act from passing, which we saw last year from Senate leadership when the SAFE Act was not included as an amendment to the final NDAA bill (annual defense spending bill). Today's announcement matched with the recent pivot from Sen. Booker on the social justice aspect of the SAFE Act could clear the path for the cannabis bill to remain included in this year's version of the NDAA, potentially passing in the lame duck session this December, in our view. We reiterate the SAFE Act could lead towards many important snowball effects including: 1) lower cost of capital; 2) uplisting to a major exchange, which could increase liquidity and have important re-rating consequences; 3) inclusion of companies within major indices which could drive meaningful institutional adoption beyond the industry's existing value proposition, and 4) open the door for
companies outside the industry to make strategic acquisitions with big tobacco showing considerable interest.
Cannabis scheduling review could have many consequences, with 280E in focus. Currently, it remains unclear on the timeline and outcome of the administration's review with multiple possibilities each having separate consequences (see detailed analysis of process here). For the timeline, given the FDA is involved in assessing cannabis' medical value, the CBD de-scheduling experience suggests a result may not occur quickly. On the outcome, Pres. Biden previously supported cannabis to be on Schedule II, which may result in no meaningful change to MSO's operating environment. However, we are encouraged that both the Secretary of HHS and AG Garland have both favourable stances towards cannabis. To us, complete de-scheduling would be a surprise with a movement to a less restrictive schedule more likely given Epidiolex was approved in 2018 as the first cannabis-derived drug and our most recent similar experience of cannabis' schedule being explored was in 2016 with the DEA confirming its Schedule I status. We note Schedule III-V would result in 280E no longer being applied, which could increase MSO cash flow substantially, in our view. However, there may be some unintended consequences with the risk of overregulation by the FDA, which could catalyze Congress into action beyond the SAFE Act.
History suggests shares could rise -3x near term while 280E change implies 50-250% increase without re-rating. Looking to the 2020 elections when Democrats confirmed a trifecta, we see a peak valuation above 21x EV/NTM EBITDA (see figure 2) with current valuation of MSOs near 8x, suggesting shares could increase up to 3x over a short period (3-4 months in last cycle). Looking at the effect of removing 280E across our coverage could result in 2023e OCF increasing by an estimated -50-250% (see figure 3) with 2023e OCF yields between 5-15% (see figure 4). When comparing to other industries on an EV/EBITDA basis which implies 280E removal, we see a valuation re-rating of -4.5x-5.5x on EV/EBITDA (see figure 5).
Expect most levered companies to outperform in the short run and largest in the long run. Currently, we would expect shares to begin pricing in the probability of SAFE passing, which primarily lowers the cost of capital and could be most beneficial in the near term to those companies that are most levered and are looking at financing options. Among our companies under coverage (figure 6), we highlight TER which is facing $60m of debt maturing in Nov (cash -$25m) and CL whose divestitures as part of the CCHW transaction are necessary to reduce debt loads. We would subsequently expect the most senior and large companies to outperform with CURA, GTII and TRUL among companies under coverage, as uplisting becomes a focus and institutions/indices would look to these operators first as candidates. We see more limited benefits for Canadian LPs as the valuation gap narrows with US MSOS and they potentially compete with outside-cannabis parties for acquisitions in a rising valuation environment.
Thanks to In Plain Sight and Warren wanna be for asking how the hurricane treated me . Its something unexplainable, some one in my town clcked 178 mph gusts , 50 % of restauraunts got roofs riiped off etc etc We had no power and water for 8 days , luckily i was 20 to 30 miles north of the surge of water .We got the highwinds for 7 hours straight of 150 plus winds .Its been 12 days and still cleaning up and i was one of the lucky ones. I have plenty left to do . But sounds like some good news with the rescheduling , Gratefull to be back and I still have my cottage and my island is still here. Thanks again to all for keeping the board so active .
Cantor Fitzgerald on Safe
Investment Summary: SAFE is not dead, contrary to what stocks may be implying.
Cannabis stocks' performance seems to be signaling nothing will happen under the 117th Congress on the subject of cannabis reform (MSOS ETF closed at a historical low on Friday 9/23 and fell 30% in the last month vs. -12% for the S&P500). However, we do not think SAFE is dead, even though passage, as part of a broader bill in the lame duck session, now seems to be the best-case scenario, compared with our prior expectation that it was the least we could get this year. In our view, Sen Booker holds the keys to SAFE being put up for a vote, and Sen McConnell is key to final approval (whether he whips against it or lets 10-12 Republican Senators vote for it). We believe that adding wording on the removal of 280E to SAFE (supposedly, a key feature supported by Sen Booker) would probably secure the 60 votes, but "restorative justice" add-ons (another feature supported by Sen Booker) would likely erode Republican support. The time may come for the latter at the federal level, but not in the short term. Importantly, we hope people in Congress realize that without SAFE passage in the short term, the industry will consolidate further, in our view, as small/mid-size operators may struggle to survive in the current macro environment. Lastly, we do not think there will be much time for horse-trading, but inclusion in the defense bill (NDAA) of SAFE, together with bills such as HOPE and Cannabis Research, may also help garner bipartisan support. We look forward to stress-testing our assumptions when we meet members of Congress this Thursday in DC (we are bringing a small group of investors to meetings in the US Capitol). Key questions: a) is “SAFE in the lame duck” just wishful thinking? b) how does the election outcome impact chances of SAFE passage? c) does it really come down to two Senators (Booker and McConnell)? d) what changes to SAFE would secure its success and which would kill it?
Perspective , but honestly if you read the artcile everyhting is based on the narrative that the bigger MSO's will be the ones to survive.. SHWZ need's no legislation to happen nor safe banking they're in the oldest and best Cannabis market state wise . Sure Margins are tight but JD and the team know how to make money in tight margin scenarios... At some point SHWZ may be the MSO model all others will emulate
https://toddharrison.substack.com/p/will-the-us-cannabis-industry-survive
The average loan(if you can even get one) to the Cannabis industry is over 20% maybe even over 25% to 30% . If you read more then just the headlines you will know That JD has tries to shop the loan and those rates where the results . Questioning the integrity of another based on faulty information makes no sense . Better Due Diligence is the best path so honest conversations and commentary can occour.