Earnings Did Little To Stem The Decline In MJardin Stock
MJardin Group reported its third consecutive earnings miss last month. The Denver-based cannabis company has faced a short and disappointing history for its stock, which now trades under $1 per share. While the equity has stopped declining for now, the recent earnings report did little to renew confidence in MJardin.
MJARF Logged Another Earnings Miss
Last month, I recommended investors wait to buy MJARF stock until after the company released its earnings report. Revenue increased by about 21% while gross margins rose by around 50%. Unfortunately, operating expenses nearly tripled. This sent MJARF to a $14.43 million net loss, well above the $3.95 million net loss from the same quarter last year. On a per-share basis, this translated into a loss of 28 cents per share, well above the five cents per share forecasted by analysts. The needed move toward profitability did not materialize for MJardin. Hence, in three earnings reports, MJARF stock has fallen short of estimates all three times. Although the stock maintained its value following this news, it resumed its decline within a few days and then recovered slightly. Currently, it trades at around 83 cents per share. Although it has bounced off of the 52-week lows, it also means continued disappointment for longer-term investors. MJARF stock debuted in the $6 per share range last fall.
MJardin Still Funded By Asset Sales
Unfortunately, MJardin continues to gut itself to obtain the cash needed to stay afloat. As previously reported, it sold and leased back its Las Vegas facility to marijuana real estate investment trust (REIT) Innovative Industrial Properties . The company will now employ the same sale and lease-back strategy with the Peguis First Nation on its Warman Road Project. Such an approach looks increasingly risky in an environment of falling prices for dried cannabis. Forecasts also continue to worsen. Analysts had forecasted a break-even year three months ago. Now they believe the company will lose 23 cents per share. MJARF stock bulls can still hold out some hope as analysts still forecast profitability for fiscal 2020. However, those profit estimates have also continued to fall. Three months ago, Wall Street predicted 45 cents per share in earnings for fiscal 2020. That same estimate fell to 18 cents per share two months ago. After earnings, forecasts again fell, this time to 17 cents per share. If MJardin wants to keep its doors open, it will have to begin meeting these profit estimates, and soon.
The Bottom Line
Unfortunately, the recent earnings report reinforced the bear case for MJARF stock. Though revenues continue to rise, the continued earnings misses make it easy to understand why the stock has lost more than 85% of its value since the IPO. The company has employed a sale and lease-back strategy to fund its operations. However, at some point, it will have to stand on its own to stay in business. Sadly, management has yet to release a quarterly report that beats earnings estimates. Unless revenue can begin to rise faster than expenses soon, investors have to call its future into question. The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Capital 10X hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer. Read the full article