MedMen stock has been a questionable investment in 2019. Aside from burning through cash in order to expand operations at a fierce rate, MedMen Enterprises (CSE:MMEN) (OTCQX:MMNFF) has come with a host of controversy surrounding its head office.
But looking ahead, there are several clear reasons why this stock remains on the radar for many.
MedMen Stock: Wall Street is Bullish
According to the Motley Fool, Wall Street is bullish on MedMen stock. This is despite the company currently holding the crown for being one of 2019's worst-performing cannabis stocks. So far this year, shares have lost over 32%.
But it is far from over for MedMen Enterprises. Despite hitting lows of $1.93 a share last Wednesday, Wall Street still "anticipates that MedMen could hit $6, more than tripling its current market cap of close to $950 million."
California Mecca
Why might this be? It might come down to MedMen's early success in taking over the largest cannabis market on the planet: California. The company has over 10 cannabis dispensaries in California alone and has already shown sales per square foot that rival that of tech-giant Apple's stores. As analyst Sean Williams puts it, the company is "proving that its upscale experience and efforts to normalize the cannabis-buying process are working."
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Operating in the mecca that is California puts MedMen Enterprises in the heart of a country where sales are estimated to reach $11.2 billion and $13.7 billion this year alone. Those sales are likely to grow in the future as the US still only has nine states where recreational marijuana is legal.
MedMen Stock Red Flags
There are red flags here too, though, and you can't mention the good without a nod to the bad—especially in MedMen's case. The company has suffered astronomical operational losses. Its latest quarterly report featured a $53.3 million loss from operations. This means that in the last nine months, MedMen's operating loss has surpassed $178 million.
Burning through cash like this has investors questioning whether or not the company will actually survive long-term—even with its recent investment from Gotham Green Partners.
Further, Williams continues by saying:
"We're also seeing significant slowing in organic sales growth in what should be MedMen's most impressive market. Sales growth in the company's existing California locations grew by a mere 5% from the sequential second quarter."
So is this a case of the early bird getting the California worm? Spending big now to take over the biggest cannabis market on the planet? Or perhaps MedMen stock should be avoided until the company actually makes money.
What are your thoughts?
Featured Image: Canva
