It is nice to see that Stanley is coming around...I know that I have been focused on margins, but I also take market of operation into the fold. I don't consider 50% gross margin and 30% EBITDA as a success if your operation is in Florida or some other limited licensed market.
Jeff Bezos famously said, “Your margin is my opportunity.”
The margins that SHWZ is putting up in Colorado and New Mexico, two highly competitive states, should suggest that the 'top-MSOs' should be flocking to those markets of operations, since an existing (smaller) operator is pulling numbers higher than they are. IMO investors need to be asking themselves why aren't they? I mean...we know. We know they they are not nearly as efficient so they have to chase the markets where they are getting a ridiculous return -- while also crying about cost compression and increased competition.
For example: Trulieve recently PRed that it would be closing shop in CA and MA markets. CA was like one location, so I think that made sense. MA, on the other hand, was 3 stores and a large grow. Calling it 'optimization efforts to preserve cash and improve financial performance'...you know...the positive spin investors get behind. Per a local MA article, cost compression is to blame (I dont share this opinion)...but indicated that the market dropped from $400/oz in early 2021 to around $171/oz today.
Looks depressing...THAT IS UNTIL YOU REALIZE...SHWZ is pulling a better gross and EBITDA margins while at the same time the Colorado Dept of Revenue announced average market price for retail bud at $649/lbs -- PER POUND!
There is obviously something to be said about a 'go-deep' strategy!!!
If these operators are bailing from markets where they are getting $2700+/lbs, truly due to 'cost compression'...I don't think that they will EVER reach a point of "optimization efforts" that will make them a profitable operator if the federal govt ever decides to legalize cannabis and cannabis becomes a commodity and normalizes (nationally) around have the current MA value. We just need investors to quit latching onto the #MSOGang teat...to wake up and use their head...and to think further down the line if/when all of these catalysts come to fruition. To see that national square footage (scale) is not necessarily a target for alcohol, tobacco, pharma, etc. The biggest is not necessarily the best. That there are operators capable of producing in (extremely) challenging environments with proof of scalability. IMO, it is this type of company that, if and when the time comes, the larger buyer/industries will focus on. Now the hard part...waiting for proof of concept.
