MariMed Inc. (MRMD:OTCQX) kicked off 2023 with "solid" Q1 results that outperformed expectations, reported Echelon Capital Markets analyst Andrew Semple in a May 9 research note. The company produces and distributes medicinal and adult-use cannabis products in the U.S.
Also, the short-term outlook is promising for MariMed, driven by several recent and upcoming company developments, Semple purported.
"Our bullish view is further supported by MariMed's bolstered balance sheet, ample growth opportunities within existing markets and in new states via mergers and acquisitions, as well as a major pick-up in the adult-use sales in Maryland," Semple wrote.
Compelling Potential Return
MariMed remains an attractive investment opportunity, noted Semple, given that at its current share price of US$0.48 it is trading at a discount to small-midcap as well as large U.S. peers.
The stock boasts a "healthy upside," too, added Semple. Echelon's US$1 per share target price on the company implies a significant possible gain of 111%. Accordingly, MariMed is rated Speculative Buy.
Wholesale Segment Stands Out
Semple summarized the cannabis company's Q1/23 operational and financial results, noting they generally exceeded Echelon's estimates and were in line with consensus' forecasts. The analyst also pointed out that both MariMed's retail and wholesale divisions outperformed expectations, the latter more so.
Wholesale revenues in Q1/23 were up 71% year over year (YOY) and up 5% quarter over quarter (QOQ). They amounted to US$10.4 million (US$10.4M); Echelon expected US$9.4M.
"These results speak to our thesis that MariMed is delivering craft-quality products at scale, and its truly premium product portfolio has mitigated the impact of pricing declines," Semple commented. "New product launches (with MariMed beginning to venture into value category flower) and innovative product formats also likely helped to sustain strong wholesale performance."
Retail sales were US$23.2M, also above Echelon's projection of US$22.6M.
Total Q1/23 revenue was US$34.4M versus Echelon and consensus' estimates of US$33.3M and US$34.7M, respectively.
Overall sales increased 9.9% YOY but declined 4% QOQ, mainly due to normal seasonality and greater competition, Semple wrote.
The gross margin was 45.6%, a tad below Echelon's forecast of 46.1%.
"We believe there is room for additional margin leverage as MariMed ramps revenue throughout 2023," Semple wrote.
MariMed ended Q1/23 with US$21.6M in cash, below Echelon's estimate of US$27.6M.
Earnings To Remain Robust
Management reiterated its guidance for FY23: at least US$150M in sales, about a 48% gross margin, at least US$35M in adjusted EBITDA, and US$30M of capex.
"We view the outperformance in Q1/23, combined with a reaffirmed outlook, positively," wrote Semple. "The 2023 outlook suggests MariMed expects to deliver 12% YOY sales growth and 8% YOY adjusted EBITDA growth."
Growth Drivers Aplenty
Upcoming and recent events should help MariMed continue to grow revenue, Semple pointed out.
"We expect H2/23 should demonstrate the bulk of these growth drivers materializing, indicating that MariMed will likely sustain growth momentum into 2024 where it will benefit from its first full year of contribution from growth investments that turn online in mid-2023," Semple wrote.
The biggest anticipated development is the start of adult-use cannabis sales on July 1, 2023, in Maryland, where the company is one of the biggest wholesale suppliers. This should positively impact MariMed's wholesale operations and its recently opened dispensary in Annapolis.
Also in the plan for this year, MariMed will debut its first store in Ohio in Q2/23 and its fifth store in Illinois the following quarter. Just last month, it launched a shop in Beverly, Mass. Additionally, the company intends to add new production capacity throughout the rest of 2023 in Illinois, Maryland, and Massachusetts.
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Disclosures for Echelon Capital Markets, Marimed Inc., May 9, 2023
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ANALYST CERTIFICATION
Company: MariMed Inc. | OTC:MRMD
I, Andrew Semple, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that I have not, am not, and will not receive, directly or indirectly, compensation in exchange for expressing the specific recommendations or views in this report.
IMPORTANT DISCLOSURES
During the last 12 months, Echelon Wealth Partners Inc. provided financial advice to and/or, either on its own or as a syndicate member, participated in a public offering, or private placement of securities of this issuer.
During the last 12 months, Echelon Wealth Partners Inc. received compensation for having provided investment banking or related services to this Issuer.
