Stem Holdings Inc. (STEM:CSE; STMH:OTCQX) posted a net loss in Q2 FY22 that had improved year over year, but the company's quarterly revenue, in comparison, was down, reported Noble Capital Markets analyst Joe Gomes in a May 23 research note. These recent numbers, however, were in line with Noble's expectations.
The cannabis firm has strong operations in California and Oregon, wrote Gomes. However, uncertainty remains about how Stem will fare with more and more other multistate operators entering the market. It is also unclear what will happen to the company's other holdings, as Stem is working to monetize its assets.
"With the company's future still in a state of flux, we are maintaining our Market Perform rating," Gomes added.
The cannabis firm posted a net loss of $3.5 million ($3.5M) in Q2 FY22, Gomes reported, which is much better than last year's $8.6M and slightly better than Noble's estimate of $4M.
As for Stem's net revenue during the quarter, it was $4.1M. This is less than both the company's Q2 FY21 revenue of $5.5M and Noble's projected $4.2M.
Driving this weaker year-over-year (YOY) revenue was decreased retail sales, which decreased to $3.2M from $6M.
"We attribute the drop to a combination of a soft overall cannabis market and Stem's ongoing restructuring of its Oregon operations," Gomes wrote, adding, however, that the latter continues to turn around.
The Florida-based company's wholesale business, on the other hand, increased modestly YOY in its second quarter.
There are other positives in the Stem story, too, Gomes highlighted. For one, Stem's revenue is expected to sequentially rebound throughout the rest of FY22, Gomes wrote. For Q3, Noble projects revenue of $4.5M and a net loss of $3.4M. For full-year 2022, the investment banking firm estimates revenue of $17.8M and a net loss of $14.1M.
Two, Stem raised more than $4M in cash since the end of Q2 FY22, indicating progress with this effort.
Stem Holdings is currently trading at around $0.04 per share.
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Disclosures for Noble Capital Markets, Inc., Stem Holdings, May 23, 2022
Any opinions expressed herein are subject to change without notice. All information provided herein is based on public and non-public information believed to be accurate and reliable, but is not necessarily complete and cannot be guaranteed. No judgment is hereby expressed or should be implied as to the suitability of any security described herein for any specific investor or any specific investment portfolio. The decision to undertake any investment regarding the security mentioned herein should be made by each reader of this publication based on its own appraisal of the implications and risks of such decision.
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Noble accepts no liability for loss arising from the use of the material in this report, except that this exclusion of liability does not apply to the extent that such liability arises under specific statutes or regulations applicable to Noble. This report is not to be relied upon as a substitute for the exercising of independent judgement. Noble may have published, and may in the future publish, other research reports that are inconsistent with, and reach different conclusions from, the information provided in this report. Noble is under no obligation to bring to the attention of any recipient of this report, any past or future reports. Investors should only consider this report as single factor in making an investment decision.
The majority of companies that Noble follows are emerging growth companies. Securities in these companies involve a higher degree of risk and more volatility than the securities of more established companies. The securities discussed in Noble research reports may not be suitable for some investors and as such, investors must take extra care and make their own determination of the appropriateness of an investment based upon risk tolerance, investment objectives and financial status. The company in this report is a participant in the Company Sponsored Research Program ("CSRP"); Noble receives compensation from the Company for such participation. No part of the CSRP compensation was, is, or will be directly or indirectly related to any specific recommendations or views expressed by the analyst in this research report.
Noble has provided capital markets advisory services in the last 12 months. Noble has received compensation for non-investment banking services in the past 12 months. The Company has attended Noble investor conference(s) in the last 12 months.
Noble intends to seek compensation for investment banking services and non-investment banking services (securities and non-securities related) within the next 3 months.
Noble is not a market maker in the company.
