Initiating Coverage on Jushi Holdings (OTCQX: JUSHF, CSE: JUSH)

By Bill McNarland

We have initiated coverage on Jushi Holdings Inc. (OTCQX: JUSHF, CSE: JUSH) with an initial rating of Hold. Our analysis estimates a fair value of $0.78 per share, representing a potential upside of 30%. For the fiscal year 2024, we project Jushi’s revenue to be $274.3 million and EBITDA to be $41.4 million, assuming slight improvements in gross margin.

Strategic Plan and Market Position

Jushi’s 2024 strategic plan focuses on margin growth, retail expansion, and innovation. The company’s vertically integrated operations span cultivation, processing, retail, and distribution, serving both medical and adult-use cannabis markets. Jushi’s brands include BEYOND/HELLO, Nature’s Remedy, and NuLeaf, among others.

Strengths

  • Cost-Cutting Measures: Jushi has significantly improved its cost structure, enhancing gross margin and SG&A efficiency. These efforts have allowed the company to align with its peer group in key performance indicators (KPIs).
  • Cash Flow: The extensive cost-cutting measures have nearly made Jushi’s cash flow positive over the last twelve months, reducing investor risk.

Weaknesses

  • Revenue:  During the last twelve months, revenue growth has been negative.
  • Leverage: Jushi’s balance sheet shows significantly higher leverage than its peers.

Conclusion

While Jushi has shown remarkable improvements in cost cutting in the last year, its higher leverage and negative revenue growth remain a focus. The company’s strategic initiatives for 2024, focusing on margin growth, retail expansion, and innovation, position it well for future growth. However, due to higher leverage and negative revenue growth over the last twelve months, we recommend a Hold rating as the company continues to execute its strategic plan and improve its financial health. Upon seeing improvements in revenue growth and a de-risking of its balance sheet, we would consider upgrading to a Buy rating.


Bill McNarland

Bill (William McNarland, CFA) has over 25 years of experience in complementary areas of the capital markets, encompassing private equity and credit due diligence, economic and stock research and corporate finance. He has served on the boards of six different companies and has fulfilled roles as a Trustee and member of the Investment Review Committee for regulated investment funds. Having completed nine degrees and designations, with a notable distinction as a Chartered Financial Analyst, Bill is currently advancing his academic pursuits with a Master's in Psychology. Furthermore, he is a published author of seven books, all of which are available on Amazon.

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