When Will Jushi's Downfall Stop?

Jushi Holdings (CSE: JUSH, OTC: JUSHF) is a cannabis platform company aiming to become a leading multi-state owner and operator of cannabis licenses. Despite great promises, Jushi faces significant losses reflected in the stock price. A year ago, the stock price was still around $4. Now the stock price is under $1. The company needs to do financing that could push investors to lose their trust. 

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Sector Overview

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The size of the legal marijuana market in the world was estimated at USD 16.7 billion in 2022, and from 2023 to 2030, it is anticipated to rise at a CAGR of 25.4%. One of the main drivers of industry expansion has been the rise in demand for marijuana that is legal. Many nations have recently allowed the use of medicinal marijuana to treat a variety of conditions. It has been effectively utilized to treat patients with chronic pain, chemotherapy-induced nausea, Parkinson's, Alzheimer's, and other neurological disorders, among other conditions, according to several studies that have been conducted. The FDA and other groups have recently begun to embrace marijuana derivatives for treating illnesses where it has shown promise.

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Company Overview

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The idea of creating Jushi Holdings (CSE: JUSH, OTC: JUSHF) started in 2018. Jim Cacioppo believed that by combining his industry expertise with Erich Mauff and Jon Barak, two other cannabis and finance professionals, they might have a significant and long-lasting influence on people's lives all around the world. They rapidly assembled a fantastic team of professionals to form Jushi Holdings Inc. to become a preeminent owner and operator of cannabis licenses across many states.

Jushi's activities have expanded quickly in recent years because of additional cultivation, production, and retail permits obtained around the country. Jushi now gathers 1,480 people on its team.

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The company’s operations are separated into 4 branches

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The Bank: a cannabis brand that has won awards and is devoted to cultivating and breeding outstanding plants. Thanks to our team of devoted, expert gardeners, the flower created is unmatched in quality and value.

The Lab: with cutting-edge technology, originality, and creativity, the company produces particular vape devices and concentrates that have won awards. Science and art coexist.

Séché: Customers are invited to go on an untold adventure by Seche while being assisted in moving at the pace of inspiration. There is always the correct product for the right situation, thanks to alternatives including Fine Grind, Fine Flower, and Singles.

Tasteology:  a premium, all-natural cannabis-infused consumable company that focuses on terpene mixes and cannabinoid infusions for excellent flavor, incredible experiences, and predictable effects. Jushi favors formulas with specific components and little processing.

Nira: creates therapeutic THC products intended to satisfy the medical requirements of cannabis patients. Jushi emphasizes honesty, reliability, and compassion.

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Financials 

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The company updated its results for the last quarter of 2022. Revenue increased by 16.6% YoY, but the biggest issue is Jushi records heavy losses:

-Gross profit in Q4 2022 was $22.0 million, or 28.6% of revenue, compared to $19.7 million, or 29.9% of revenue in Q4 2021;

-Operating expenses for Q4 2022 were $161.2 million, compared to $45.7 million in Q4 2021. The increase in operating costs was driven by non-cash asset impairment charges, which were $122.0 million in Q4 2022 compared to $6.3 million in the prior year. 

-The net loss for Q4 2022 was $139.9 million, compared to a net income of $6.2 million in Q4 2021. 

-As of December 31, 2022, the Company had approximately $27.1 million in cash, cash equivalents, and restricted cash. For FY 2022, cash outflows for capital expenditures were $55.0 million as the Company completed a substantial amount of its expansion projects in Pennsylvania and Virginia, which is expected to lead to a reduction in capital expenditure in fiscal 2023, subject to market conditions and regulatory changes.

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“In the fourth quarter, we were able to successfully complete a $73.1 million financing to redeem our senior secured notes that were due in January. That being said, we are very aware of the challenging capital market environment facing us and the broader cannabis industry. As a result, our executive team is making real-time changes to our capital allocation strategy as we navigate these challenges and ensure we make the right investment decisions to secure our leadership position across each of our core markets.”

Jim Cacioppo, CEO, Chairman, and Founder

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Additionally, Jushi Holding announced another non-dilutive debt financing topping $20M. The company secured the loan with FVCbank. The Loan has a five (5) year term and is principally secured by the Company’s cultivation and manufacturing facility in Manassas, Virginia. The Loan will bear interest based on the 30-day average secured overnight financing rate plus 3.55%, with a floor interest rate of not less than 8.25%.

The stock price is on a continuous downtrend that has lasted for more than a year. After an all-time high of $10.5 in February 2021, the stock price decreased in valuation despite small bumps. Now, JUSH keeps digging its 52-week low. 

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Conclusion

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Jushi Holdings (CSE: JUSH, OTC: JUSHF) faces a challenging environment. Despite expanding and holding 40 cannabis retails, the company registers heavy losses, shoving the board to do financing. Jushi will need to reduce its loss deeply, or the stock price could go even lower. 

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