Medmen Enterprises Inc (OTCMKTS:MMNFF) has been one of the more disappointing names that we at Insider Financial cover in the cannabis space. While other marijuana stocks like Canopy Growth Corp (NYSE:CGC) and Aphria Inc (NYSE:APHA) have been racing up the charts in 2019, Medmen shares have been range-bound between $3 and $4. Investors are now asking when will the stock catch up and bounce?
First up, a little background info for those that are not familiar with MMNFF. MedMen is a cannabis retailer with operations across the U.S. and flagship stores in Los Angeles, Las Vegas and New York. MedMen’s mission is to provide an unparalleled experience that invites the world to discover the remarkable benefits of cannabis because a world where cannabis is legal and regulated is a safer, healthier and happier world.
With approximately 7% market share in California, the largest cannabis market in the U.S., the Company is planning to open 16 new locations across the U.S. in calendar 2019. Of the 16 new locations, 12 will be based in Florida, where MedMen is licensed for up to 30 locations. Additionally, four retail sites in Florida are expected to open in the next 90 days in the following locations: Key West, Orlando, West Palm Beach, and St. Petersburg.
MMNFF Q2 Results
For the second quarter of fiscal 2019, systemwide revenue was $29.9 million. This represents a 39.1% quarter-over-quarter increase over the first quarter of fiscal 2019 ended September 30, 2018. Systemwide revenue, pro forma to include pending acquisitions that have not yet closed, would have been $49.5 million for the quarter. In California, the Company’s eight retail locations reported a combined $23.7 million in revenue, which represents a 28% quarter-over-quarter increase. MMNFF CEO Adam Bierman said:
“Our strong second quarter results support MedMen’s commitment to drive strong retail and sales performance, while efficiently scaling the Company and executing on our growth strategy. As we emphasized last quarter, we are in a new phase of growth, one focused on continuing to operationalize our industry-leading retail footprint and increasing our profitability. We are confident in the team we’ve built to drive our success.”
Last month, MMNFF completed the acquisitions of Kannaboost Technology Inc. and CSI Solutions LLC, collectively referred to as “Level Up,” two vertically-integrated operations in Arizona. The acquisition includes retail locations in Scottsdale and Tempe, as well as 25,000 square feet of cultivation and production capacity in Tempe and Phoenix. The acquisition also includes a 40 percent stake in top-selling brand K.I.N.D. Concentrates, which is currently distributed in over 90 percent of the dispensaries in Arizona. The Company paid a combination of cash and stock valued at an aggregate of $33.5 million.
With the closing of the Acquisition and following the completion of the pending acquisition of PharmaCann, LLC, MedMen will be licensed for three medical-use cannabis dispensaries in Arizona. The flagship Level Up location in Scottsdale is one of the highest-grossing dispensaries in the state.
MMNFF is making all the right moves for the company to cement its status as a major player in the US cannabis market. While the company has been showing strong revenue growth, it has come so at a heavy price – heavy losses. For the second quarter of 2019, the Company reported a total net loss of $64.6 million compared to a net loss of $66.5 million for the first quarter. That’s $131.1 million losses in just 6 months. That is certainly enough to scare some shareholders off and explains the weakness in the share price. If MMNFF can cut back on SG&A expenses and its acquisitions start turning a profit, MMNFF can turn around and deliver a major bounce for its stockholders.
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Disclosure: We have no position in MMNFF and have not been compensated for this article.
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