MedMen stock has suffered off the back of MedMen Enterprises's (CSE:MMEN) (OTCQX:MMNFF) recent fiscal third-quarter operating results released Wednesday, May 29.
The upmarket cannabis retailer showed increasing sales of 20% from the previous year, but that success was marred by operational losses exceeding $63.1 million. Now MedMen stock is selling for $2.98 CAD on the CSE, having fallen 7% since it announced those results.
MedMen Stock Declining
Despite the company losing money, there are beacons of hope coming in from analysts at major institutions. One such analyst is Seaport's Brett Hundley who believes a "huge upside remains in a long term window" according to Yahoo Finance. He reiterates a Buy rating on MedMen stock and has set a price target of $7 USD. Such a target would prove an upswing of 134% from current prices.
Hundley notes that the company needs to "better manage cash burn and [its] overall capital structure." He goes on to suggest that if management can do this, then the company offers investors many potentials:
"If management can better execute against such metrics, we think that company valuation will improve against what we deem is another widely held investor view: the strength of MedMen's brand, footprint and asset base."
Hundley is not alone. The analyst's sentiment is echoed by other Wall Street institutions. Yahoo Finance goes on to say that "[o]ut of 4 analysts polled in the last 3 months, all 4 are bullish on the stock."
MedMen in California
MedMen Enterprises is a US cannabis retailer that counts cannabis-mecca California as its leading market. The company made roughly $25 million during Q3 from its 10 outlets in this state. It is now expecting an annual average store revenue of $20 million.
However, the issue for MedMen stock investors is how much cash the company is losing to expand its operations.
Recently, it reached out to private equity firm Gotham Green Partners for a $250 million investment to fund general working capital. The need for outside capital suggests the company is in dire need of covering its mounting losses.
It's a fine line MedMen Enterprises is toeing, between running out of money, expanding rapidly, and making impressive sales. It's no surprise if investors' heads are in a spin over this one.
MedMen stock has fallen over 60% already since late 2018, and while it currently remains unprofitable, it seems to have Wall Street in its corner, so what does that say?
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