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MedMen: Price Targets and Ratings after Q1 Earnings

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MedMen Enterprises (MMEN)(MMNFF) reported its earnings for the first quarter of fiscal 2020 on November 26. For the quarter, the company reported revenues of $43.98 million, which was lower than analysts’ expectation of $47.75 million. Its net EPS came in -$0.31, wider than analysts’ expectation of EPS of -$0.10. For more on its first-quarter performance, please read Key Takeaways from MedMen’s First-Quarter Earnings.

The lower-than-expected first-quarter performance led the company’s stock to fall. As of December 3, the company has lost 14.1% of its stock value since reporting its first-quarter earnings. Amid these events, let’s look at analysts’ price targets and recommendations for MedMen.

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Analysts’ price target for MedMen

Following MedMen’s weak first-quarter performance, Canaccord Genuity cut its price target by 50% to 1 Canadian dollar. As reported by Cantech Letter, Nav Malik of Industrial Alliance Securities lowered his price target from $1.65 to $0.85.

From the above graph, we can see analysts’ consensus price targets have been falling since May, which indicates declining analysts’ sentiments. On December 3, analysts’ consensus price target stood at 2.37 Canadian dollars, which implies a fall of 19.4% from 2.94 Canadian dollars on November 3. The new consensus price target represents a 12-month return potential of 330.7%.

On December 3, MedMen’s peers Curaleaf Holdings (CURLF), Cresco Labs (CRLBF), and Organigram Holdings (OGI) were trading at discounts of 105%, 168.8%, and 101.2% from their respective price targets.

Analysts’ opinions

As reported by Cantech Letter, Nav Malik wrote in his research that the management’s guidance to achieve $300 million in annualized revenue by the end of 2020 was lower than his projection of $400 million. So, he lowered his estimates.

For fiscal 2020, Malik expects the company to report revenues of $229 million, while its EBITDA should be -$86 million. However, he expects the company to report EBITDA of $20 million in fiscal 2021 on revenues of $338 million.

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Analysts’ recommendations for cannabis stocks

There have been no rating changes since MedMen reported its first-quarter earnings. Six of eight analysts gave the stock a “hold” rating. Of the remaining two, one analyst favors a “buy” rating, and another analyst recommends a “sell” rating. In the last 12 months, the coverage on MedMen has increased from six analysts to eight analysts.

Let’s look at analysts’ recommendations for MedMen’ peers:

  • Analysts are bullish on Curaleaf, with seven of the eight analysts favoring a “buy” rating. Please read Curaleaf Stock: GMP Expects More than 200% Growth” for more on analysts’ recommendations.
  • For Cresco Labs, all 10 analysts that follow the stock gave a “buy” rating. Read Cresco Labs: Analysts’ Ratings Post Q3 Earnings for more on analysts’ opinions.
  • For Organigram, 12 of the 15 analysts rated the stock as a “buy,” while the remaining three analysts rated the stock as a “hold.”

YTD performance for cannabis stocks

So far, this year, MedMen has lost 85.7% of its stock value as of December 3. The weak performance in the last two quarters, the accusation of financial irregularities, and the termination of its merger with PharmaCann appear to have dragged the company’s stock price down.

During the same period, Organigram and Cresco Labs have fallen by 21.7% and 19.7%, respectively. However, Curaleaf has returned 23.7% YTD. Curaleaf reported an impressive third-quarter performance on November 19. For more, read Curaleaf Impressed with Strong Q3 2019 Earnings. Also, check 420 Investor Daily for more marijuana-related news and updates.

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