Canaccord Drops Medmen Price Target To $0.00, Reiterates Sell Rating

After Medmen Enterprises’ (CSE: MMEN) fourth-quarter results dropped after hours on October 15th, Canaccord downgraded Medmen’s 12-month price target to $0.00 while reiterating their sell rating on the company. Commenting on the price target downgrade, Canaccord stated, “we believe MMEN’s value at this time is more likely to accrue to existing secured lenders.”

Matt Bottomley headlines the report with, “FQ4/20: Turnaround prospects fade as revenues take a significant hit with path to profitability hampered.”

Medmen’s revenue came in at U$27.4 million, a 40.3% decrease quarter over quarter, and almost half of Canaccord’s estimate of U$43.5 million. Bottomley says these results “cast significant doubt on the
company’s ability to execute its turnaround strategy to reach profitability and/or be able to meet its longer-term capital obligations.”

The reason for the massive revenue drop was due to reduced foot traffic in tourist markets of Los Angeles and Las Vegas, a mandated store closured in Nevada, and looting due to COVID-19 and civil unrest.

Revenues in California’s primary market declined by 50% quarter over quarter, which was on the back of a 9% drop last quarter. Management did note that they believe revenues would rebound to U$37.4 million, a figure that is still roughly 20% below its prior period. Bottomley says he considers “the ability for the company to navigate its way to profitability is in serious jeopardy – particularly if COVID-19 headwinds continue to steepen.”

The company booked an impairment charge of U$240 million related to its cultivation and manufacturing facilities in multiple states. Matt see’s Medmen’s operational loss to be concerning given its horrible balance sheet.

Speaking of the horrible balance sheet, Bottomley states,, “We still believe the need for additional capital is fairly immediate” and “we believe the ability for the company to execute on its stated objectives (organic growth, new store openings, etc.) and/or satisfy its longterm debt to be at considerable risk.” The company ended the quarter with U$10 million of cash on hand. This does not include a U$20 million commitment from lenders, U$5 million from a convertible debenture financing, and U$10 million from selling a retail license.

Bottomley has reduced its fiscal year 2021 estimates downwards. They now forecast revenue to be U$197.2 million compared to the prior estimate of U$303.4 million. Adjusted EBITDA is estimated to be (U$41.9) million, which was previously U$10.7 million.


Information for this briefing was found via Sedar and Refinitiv. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

Video Articles

Is Gold’s Bull Market About to Hit Junior Stocks? | Ken Armstrong – Westhaven Gold

Surge Battery Metals: The Nevada North Lithium PEA

Silver @ $36 & We’re Still 200M Oz Short | Paul Andre Huet – Americas Gold and Silver

Recommended

Goliath Resources Closes Out Funding Round With Total Gross Proceeds Of $27.1 Million

Silver47 Kickstarts 4,000 Metre Drill Campaign At Red Mountain Project

Related News

Sundial Growers Expected To Post $13.88 Million In Q1 2021 Revenues

Sundial Growers Inc. (NASDAQ: SNDL) announced that they will be reporting their first quarter financials...

Tuesday, May 11, 2021, 02:11:00 PM

Meta Platforms: BMO Calls The Bottom, Saying “Sell-Off Feels Overdone”

Meta Platforms (NASDAQ: FB), which is reporting its first-quarter results on April 27, is just...

Monday, April 25, 2022, 04:22:00 PM

Hycroft Mining Cash Infusion Not Near Enough To Re-Enter Production, Says BMO

This week, Hycroft Mining (NASDAQ: HYMC), a busted SPAC mining company taken public by Mudrick...

Thursday, March 17, 2022, 04:52:00 PM

First Quantum: BMO Lowers Target To $32 After Guidance Issuance

On January 17th, First Quantum Minerals (TSX: FM) announced its 2021 preliminary production and 2022...

Wednesday, January 19, 2022, 04:29:00 PM

Aurora Cannabis: Analysts Raise Price Targets Following Q1 Results

Yesterday, Aurora Cannabis (TSX: ACB) (NYSE: ACB) reported their first quarter 2021 results. Aurora reported...

Tuesday, November 10, 2020, 03:21:00 PM