MedMen Enterprises (OTCMKTS:MMNFF) finally started to recover after struggling last year. Recently, the company reported its third-quarter results. The revenue growth increased due to the current cannabis demand. MedMen saw 41% YoY (year-over-year) revenue growth to $45.9 million in the third quarter. However, the recent protests following George Floyd’s death in the US forced the company to temporarily close all of its stores. MedMen stock declined 1.6% and closed at $0.23 on the OTC markets on June 1. The stock also fell by 1.5% and closed at 0.32 Canadian dollars on the Canadian Securities Exchange.
MedMen temporarily closes all stores
The COVID-19 pandemic made cannabis an essential item. Since then, cannabis sales have been increasing. More sales benefited cannabis companies, which reported good quarterly numbers. However, the peaceful protests following George Floyd’s killing took a different turn. On June 1, a Marijuana Moment article reported that MedMen temporarily closed all of its stores nationwide. MedMen saw “lootings and significant damage” in a few of its stores in downtown Los Angeles, West Hollywood, and Beverly Hills over the weekend, which led to the decision.
According to the article, MedMen’s management released an internal memo to its employees. The memo said, “Effective immediately, we are temporarily closing all stores and the corporate office to protect the safety of our employees.” The company also offered support for the ongoing injustice in the US. The company said, “Regarding the events of the last week, we are heartbroken, outraged and horrified by the tragic events in our country and the continued violence and injustice perpetrated against the Black community. To our Black colleagues, if there is any way we can show up for you during this time, we would encourage you to email [the CEO’s office].”
MedMen didn’t specify for how long the stores will be closed or what to expect from the financial impact. However, the company will focus on employees’ safety. Closed stores when demand is high could impact MedMen’s revenue growth, which increased amid the pandemic. We don’t know how store closures will impact the company’s overall profitability.
Analysts are bearish after earnings
MedMen’s results were slightly better than expected. The company has been struggling for a while. However, despite the revenue growth in this quarter, analysts are still bearish. Amid the pandemic and the protests, it’s hard to say if the revenue growth will continue with temporary store closures.
Analysts lowered their estimates for MedMen. Let’s take a look at the month-over-month revisions. For fiscal 2020, analysts reduced the revenue estimates from $195 million in May to $175 million in June. Analysts reduced the revenue estimates from $299 million in May to $238 million for fiscal 2021. For fiscal 2022, analysts reduced the revenue estimates from $334 million in May to $269 million in June.
Marijuana sales rose amid the pandemic. However, we don’t know if it’s one-time panic buying or if post-pandemic sales will continue. Analysts expect MedMen’s fourth-quarter revenue to decline to $41.5 million sequentially and from $45.9 million in the same period last year. Also, MedMen could report an EBITDA loss of $15.9 million compared to a third-quarter profit of $4.7 million. The losses could be lower than in the same period last year.
For fiscal 2020, analysts expect MedMen’s EBITDA losses to rise from the estimate of $94 million in May to $106 million. The losses could reduce in fiscal 2021 and 2022. Analysts expect the EBITDA losses to be around $27 million compared to an estimate of $22 million in May. For fiscal 2022, analysts estimate the EBITDA losses to be around $23 million compared to an estimate of $15 million in May.
MedMen’s stock performance
After the earnings, Canaccord Genuity cut the target price to 0.25 Canadian dollars from 0.30 Canadian dollars for the stock. Currently, eight analysts cover MedMen stock. Among the analysts, four recommend a “hold,” two recommend a “sell,” and two recommend a “strong sell.” The average target price on the stock is 0.47 Canadian dollars, which represents an upside potential of 50% from its last closing price. Like all of the other cannabis companies, MedMen stock rose in May due to increased cannabis sales. Cresco Labs (OTCMKTS:CRLBF), Curaleaf (OTCMKTS:CURLF), and Green Thumb Industries (OTCMKTS:GTBIF) also saw good revenue growth. In May, MedMen gained 35%, while Cresco Labs, Curaleaf, and Green Thumb gained 35%, 37%, and 50%, respectively.
Marijuana stocks performed well in May. Will the strong performance continue in June? Read Will Marijuana Stocks Continue to Surge in June? to learn more.