U.S. Cannabis Firm's Earnings to Remain Robust Through 2023
Research Report

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 $0.48 it is trading at a discount to small-midcap as well as large U.S. peers.

The stock boasts "healthy upside" too, added Semple. Echelon's $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 $10.4 million ($10.4M); Echelon expected $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 $23.2M, also above Echelon's projection of $22.6M.

Total Q1/23 revenue was $34.4M versus Echelon and consensus' estimates of $33.3M and $34.7M, respectively.

Overall sales increased 9.9% YOY but declined 4% QOQ, mainly due to normal seasonality and greater competition, Semple wrote.

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 $21.6M in cash, below Echelon's estimate of $27.6M.

Earnings to remain robust

Management reiterated its guidance for FY23: at least $150M in sales, about a 48% gross margin, at least $35M in adjusted EBITDA and $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.

Important Disclosures:

1. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of [COMPANY], a company mentioned in this article.
2. Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor/employee. He/she or members of his/her household own securities of the following companies mentioned in the article: [COMPANY]. He/she or members of his/her household are paid by the following companies mentioned in this article: [COMPANY]. His/her company has a financial relationship with the following companies referred to in this article: [COMPANY].
3. The following companies mentioned in this article are billboard sponsors of Streetwise Reports: [COMPANY]. Click here for important disclosures about sponsor fees. As of the date of this article, an affiliate of Streetwise Reports has a consulting relationship with [COMPANY].Click here for more information. An affiliate of Streetwise Reports is conducting a digital media marketing campaign for this article on behalf of [COMPANY]. Please click here for more information.
4. The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5. From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases.
6. This article does not constitute medical advice. Officers, employees and contributors to Streetwise Reports are not licensed medical professionals. Readers should always contact their healthcare professionals for medical advice.