April has been volatile for Planet 13 Holdings (CSE:PLTH) (OTCQB:PLNHF). Unable to breach the $4 CAD threshold, PLTH stock hit lows of $3.14, highs of $3.49, and everywhere in between. At the time of writing, shares sit in the middle at $3.24 on the CSE.
The company’s March sales report from its 16,000 sq ft Cannabis Superstore in the heart of Las Vegas caused a flurry of excitement. But now, that excitement has seemingly waned. An interesting theory posed by SeekingAlpha, in an article titled “Planet 13: One Cannabis Store Is Not Enough,” may have hit a nail on the head as to why.
Planet 13 Stock
Planet 13’s Cannabis Superstore is in the tourist-rich, entertainment mecca that is, the Las Vegas strip.
Business here has been explosive: the company reported revenue of $5.5 million for the month of March alone. To put this in perspective, some of Canada’s leading names such as Cronos Group (TSX:CRON) (NASDAQ:CRON) reported similar revenue but for an entire quarter—not just one month.
Anticipation for the store’s success coupled with the actual results saw Planet 13 stock skyrocket 113% so far this year.
But with a “lack of track record of winning licenses in Nevada” and an “unclear path to enter other states,” will one store be enough to keep Planet 13 stock on the up?
Aside from the Superstore dispensary, Planet 13 Holdings hasn’t much else going on. Its operations only lie in Nevada, where it has the license for that dispensary, one cultivation license for a small plot capable of growing 950 kgs per annum, and two retail licenses. But subsequently, it is using the latter two to expand the Superstore.
Though it applied, “the company wasn’t able to secure additional retail licenses in the last application round.” Perhaps it will be successful in the future, but for now, this stifles business.
Unique Business Model
The company is currently running off of a business model that is relying 100% on the revenue generated from its one Superstore. And herein lies a big risk. No matter how big and exciting the company makes its store—a phase II expansion is currently underway—there is no diversification in this stock at present. Should footfall deplete, or surrounding competition increase, Planet 13 Holdings may find it tough to keep those sales figures high.
Further, the company takes advantage of a very unique market—Las Vegas is not like other states. It has huge numbers of tourism and consumerism that is boosting the impressive performance of the Superstore. But as SeekingAlpha says: “other states might not have the same business environment as we have not seen other operators reaching similar economics at their stores.“
As such, Planet 13 could be considered “as a largely one-time success that is difficult to replicate.” Without knowing that there is a back-up plan, this is a tough investment call for those wanting a long-term surety.
What do you think? Are you a Planet 13 fan?
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