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
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