Florida's Marijuana Market Could Drive 139% Revenue Spike For Planet 13, Fourfold Market Cap Growth

Planet 13 Holdings PLNH has completed its acquisition of VidaCann, reporting $12.5 million in sales for the first quarter of 2024, a 56% increase compared to the previous period.

Pablo Zuanic of Zuanic & Associates notes, "We continue to be blown away by the performance of the VidaCann team," emphasizing the growth and efficiency improvements in both cultivation and retail operations. By introducing Planet 13's brands and new product formats, further revenue growth is anticipated.

VidaCann’s Performance

VidaCann operates 26 stores, accounting for 4% of Florida's 625 cannabis shops. Despite a stable store count, sales per store have grown significantly. According to the report, flower volumes increased 157% year-over-year, while extracts rose 37% year-over-year.

“Flower volume per store reached 1.63K ounces in Q1 2024, up from 0.64K ounces in Q1 2023, nearing the state average of 2.25K ounces. Similarly, extracts per store were at 3.12 million mg in Q1 2024, compared to 22.28 million mg in Q1 2023 and the state average of 6.91 million mg.,” reads the report.

EBITDA margins for VidaCann were 22%, a significant improvement from the 2% seen in 2023. The company plans to expand its store network by 10-15 stores before the Florida ballot in November, which could potentially allow for up to 70 stores, given the current canopy capacity.

Revenue And EBITDA Projections For Planet 13

Despite potential delays in the recreational cannabis market in Florida, which is expected to commence by mid-2026, Zuanic projects that Planet 13 will achieve a $220 million sales run rate by the end of 2026, up from $92 million in the fourth quarter of 2023. This represents a 139% increase in revenue.

EBITDA is expected to reach $48 million, compared to break-even in the first quarter of 2024. Additionally, the new store in Illinois is anticipated to enhance margins in Nevada and California. "The lift to PLNH’s sales and EBITDA is significant," said Zuanic, suggesting that the Florida expansion is underappreciated by investors.

Market Impact And Valuation

Zuanic calculates that if the recreational market in Florida reaches $6 billion and Planet 13 captures a 4% market share, the proforma revenue could increase by approximately $200 million.

At a 40% EBITDA margin and a multiple of 10x, this would represent a significant value creation, potentially over four times the current market cap of $188 million.

The equity offering and the El Capitan Advisors saga have impacted stock performance, with Planet 13 shares down 15% over the last 90 days. However, Zuanic maintains an Overweight rating, saying current valuation does not fully reflect the expected revenue lift from Florida and Illinois expansions.

The report notes the stock trades at a steep discount of 1.3x CY24 proforma sales, compared to the sector average of 1.9x.

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Zuanic’s Q1 Overview

In the first quarter of 2024, Planet 13's sales fell 8% year-over-year, but EBITDA margins improved from -5% to break even. Nevada remains a challenging market due to lower consumer spending and price deflation, yet Planet 13 maintains its market share.

In Illinois, the new store near the Wisconsin border is expected to reach a $12 million annual run rate by 2025. California operations have stabilized, with events driving traffic to stores. The company has filed refund claims for 2020-2022, which could have saved $10 million in cash flow in 2023 if income taxes were not impacted by Section 280E.

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