Planet 13: Expensive But Promising

Sep. 28, 2020 5:04 AM ETPlanet 13 Holdings Inc. (PLNHF)7 Comments
Edgar Torres H profile picture
Edgar Torres H
2.33K Followers

Summary

  • I presume Planet 13 Holdings is poised to grow due to secular tailwinds in the cannabis sector and its unique value proposition.
  • Unlike other cannabis dispensaries, PLNHF is a vertically integrated company that delivers a well-differentiated experience. I gather this will allow the company to grow quickly over the next few years.
  • Also, I think that the company has enough liquidity and internal FCF to fund its ambitious expansion plans. And if successful, it'll multiply its revenues.
  • Unfortunately, my valuation model suggests that the company is at best fairly valued. Thus, while the company will expand the long term, investors might only recover mediocre returns.
  • Consequently, I deem that the prudent approach is to wait for better prices before initiating a sizable position in the stock. In my opinion, $2 to $2.25 should be good enough.

Planet 13 Holdings Inc. (OTCQX:PLNHF) is a vertically integrated cannabis company. In my view, the company offers investors compelling exposure to the growing cannabis market through several angles. Moreover, I’d say it’s fair to consider PLNHF a growth company, as it’s expanding aggressively throughout Nevada and plans to grow nationwide eventually. Hence, PLNHF undoubtedly gives investors a great investment opportunity in the sector.

This is why I believe the underlying business is an excellent long-term hold, as it’s likely it’ll do well over time. However, the stock is currently pricing in several years of future growth, making it relatively expensive. Finally, my valuation model suggests that the company is, at best, fairly valued at these levels. And since my model’s inputs are quite optimistic, I conclude it’s prudent to wait for lower prices. In particular, I think $2 to $2.25 per share would be attractive from an investment perspective.

Source: Company website

Overview

One of the most compelling arguments in favor of PLNHF is that it’s vertically integrated. Its operations go from cultivating cannabis to branding innovative product variations and selling them through their retail stores. Moreover, PLNHF’s stores themselves are quite differentiated from other regular dispensaries. And this is where PLNHF’s stock truly shines.

You see, management is intently focused on delivering a differentiated customer experience for cannabis. This is why PLNHF is quite an individual stock in this sector. It reaps profits through every instance of its chain of production, adding value along each step. In turn, this allows PLNHF to reap the benefits of differentiation and a compelling value proposition through top line growth and healthy margins.

Source: Planet 13 often has overall positive reviews.

Growth potential

This is why it’s not surprising that the company is quickly gaining market share in its primary market: Nevada. Currently, the company has

This article was written by

Edgar Torres H profile picture
2.33K Followers
Follow me for analyses of undercovered/overlooked stocks. My takes are based on numbers but without completely ignoring the underlying story. I'm not uncomfortable holding unpopular opinions, nor do I seek them. I just want to get as close to the truth as possible.I've been an Investor for over nine years. I write to structure my thoughts. I worked on my country's stock exchange as an analyst for private debt prospectus. I worked as a sell-side analyst and also as a broker. I love the markets and everything related, and now I’m able to be a full-time investor. I'm very grateful for this. I hope my comments/articles are of use to someone else. - "Veritas Super Omnia."

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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