The multinational cannabis company Jushi Holdings JUSHFreported a significant increase in unique patient visits in Virginia, indicating strong growth in the fourth quarter of 2023.
Sales reached $67.8 million, beating the FactSet consensus of $65.3 million, while adjusted EBITDA came in at $11.3 million, beating the $10.5 million expected.
Jushi exceeded the expectations of financial experts in both sales and profits, the analyst highlighted Pablo Zuanic of Zuanic and Associates in a recent equity research report.
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Financial health and market position
Despite the challenges, Jushi's balance sheet remains manageable, with notable improvement in free cash flow trends reaching break-even levels in 3Q23 and 4Q23.
The company intends to manage its $55 million debt due in December 2024 through non-dilutive strategies, ensuring that current shareholder value is not affected.
The stock currently trades at 1.5x CY24 EV/Sales, which Zuanic says does not fully represent the potential growth of Pennsylvania and Virginia moving into recreational cannabis sales.
Regulatory landscape and expansion potential
The report also delves into the state regulatory landscape, focusing especially on Ohio, Pennsylvania and Virginia, where about 70% of the company's stores are located.
Virginia is poised to begin recreational sales by May 1, 2025, pending approval from the Governor.
Meanwhile, Pennsylvania is moving forward with bipartisan bills, aiming to finalize recreational sales legislation by June 30, and Ohio is expected to begin recreational sales in 4Q24, offering Jushi additional expansion opportunities.
Market dynamics and valuation
Jushi shares saw a 22% drop in the last 30 days, attributed to regulatory news flow and market dynamics.
However, Zuanic believes the stock will outperform the average performance of other stocks in the same sector or industry and maintains an overweight stance, citing its underrated market valuation and the significant upside potential of its operations in Pennsylvania and Virginia.
Despite the current market volatility, Jushi's strategic positioning and financial health suggest a promising outlook for investors.
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