MedMen stock is continuing to trade in the red today as the troubled pot firm prepares to release its second-quarter earnings later this week.
US pot retailer MedMen Enterprises (CSE:MMEN) (OTCQX:MMNFF) has been in hot water following months of speculation regarding its financial health, which culminated in a vendor payment crisis and ultimately led to the departure of controversial CEO Adam Bierman at the end of January. Last week, new filings showed that the company had made vendor payments with MedMen stock options, so how will this cash crunch play out in the company's earnings report?
What to Expect From MedMen's Earnings?
MedMen Enterprises is due to report its Q2 fiscal 2020 results on Wednesday, February 26, and despite some serious headwinds, analysts believe that investors may have some reason to cheer. The company is expected to post a 14% increase quarterly increase and 67.6% year-over-year gain in revenue to C$50.1 million. For the full year, the company’s revenue could grow by 66.1% to C$215 million as the US cannabis market is expected to grow following legalization in Illinois. However, MedMen stock is still down 2.5% ahead of tomorrow's earnings call.
Analysts Coverage in MedMen Stock
Although revenue is expected to grow in the quarter, profitability is likely to take a hit, with analysts expecting an EBITDA loss of C$19.6 million in Q2. One possible bonus for MedMen stock is the changing legalization landscape, with the possibility of a pro-cannabis president entering office later this year. Democrat front-runner Bernie Sanders has pledged to legalize cannabis on his first day in office, while Pete Buttigieg has also shown his support for the legalization efforts in many states like New Hampshire, Connecticut, and Missouri.
Seven analysts currently cover MedMen stock, with six recommending a 'hold' while just one offers a 'buy' rating. The average price target is C$1.60, which indicates an upside of 289% over the next 12 months. Could tomorrow's earnings mark the start of the turnaround for the troubled pot firm?
February 26 Update: Earnings Now Released
The embattled pot producer released its Q2 earnings after hours on Thursday, February 26. For the three months ended December 28, 2019, MedMen Enterprises saw net losses more than double to US$40.6 million, which amounts to 9 cents per share, compared to a loss of US$18.7 million, or 23 cents per share in the year-ago quarter.
Interestingly, revenue for the quarter actually grew 11% to US$44.1 million, although it still fell short of the US$49.5 million expected by analysts and was likely boosted by the divestiture of assets in Arizona and Illinois.
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