There has been no shortage of hype surrounding cannabis stocks in recent years, but the reality is that not all marijuana stocks are great investment opportunities. In this Fool Live video clip, recorded on Dec. 9, Fool.com contributors Matt Frankel and Jason Hall discuss Planet 13 Holdings (OTC:PLNH.F) and why Frankel is so bullish on it.
Matt Frankel: This is a company called Planet 13 Holdings. They trade over the counter, but they are a legitimate business, unlike a lot of the marijuana companies that you’ll see. If you click on a random Internet article that says three marijuana stocks, chances are they’re not the best businesses. But this one actually is. They are a physical place. They operate distribution, a big dispensary, they operate some smaller neighborhood stores, they have their own brands, they grow and cultivate their own products, they have their own brands that they sell through third-party distributors. This is not a big company, but these are big dispensaries.
I don’t know if either of you have been to their facility in Las Vegas. It’s roughly the size of the average Walmart (NYSE:WMT). It’s a big dispensary and people are generally shocked when they walk in there and just the scale of this place and how busy it is. There’s always a wait to be taken care of in there. Just a little bit of information about the company. They currently have three open retail locations. They have a big dispensary in Las Vegas right off the strip, which I’ll talk about in a minute. They have a neighborhood distribution center and they just opened their second mega superstore in the San Diego area. They are planning on getting much bigger. This is a very small company at this point. Let me share my screen real quick. I brought visual aids because Jason likes it when I do that.
Jason Hall: I do. Helps me understand.
Frankel: Here’s a little bit of information. This is where they’re at right now. They have their two retail locations in Nevada like I was talking about, the one in California. If you look on the right side of your screen, that Florida opportunity is enormous. An unlimited retail license. They have a license to open as many locations in the Florida market as they want to. As legalization continues in the state, that’s a big opportunity there. This is the entertainment complex I was talking about in Las Vegas.
Over $70 million in revenue last year and that was in 2020 when it was closed for half the year. This is a big place, a big market share. The cannabis industry where it’s legal is generally very fragmented. They have almost a 10% market share of Nevada, which is one of the biggest consumption markets in the nation. Really big company. These are just some pictures from the inside of it. There’s a restaurant in there, there’s a production facility, in addition to where you actually buy the product. This is the location of it right off the strip, closest dispensary into the strip. You can actually walk there from a lot of their hotels on the strip.
Really impressive company. There’s a lot of growth potential here, especially when it comes to their neighborhood markets. They are experimenting with a smaller scale format. Let me see. There it is. There’s one of them that’s open right now, smaller scale that they can translate all over the country and their superstores have a lot of potential as well. Check out this quote. Right under that eight-plus superstores, that’s their five-year goal. If the city is affluent enough to support a major sports team, Planet 13 is interested in opening a premium cannabis store.
Remember the Las Vegas one does over $70 million in revenue in a bad year. That was when the COVID pandemic was closing everything. If they can build a network all over the country, imagine how much revenue they could do even if they can just maintain that 9% market share that they have right now. This is a company with a lot of opportunity. The market cap is roughly $700 million right now. So, it’s a micro-cap at the moment. It is still about 55% off of its all-time high. That’s where it is right now. You can see the little rebound they had recently, but it is still very cheap.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.