STMH - Driven By Stem (STMH)(STEM:CA) - Stem Holdings: Farm-to-Home Cannabis Provider
Initiating Coverage. We are initiating research coverage on Stem Holdings. We believe the Company's recent merger with Driven Deliveries has established Stem as the first cannabis cultivator and technology omnichannel retailer with e-commerce ordering and express and next-day delivery. From Farm-to-Home. With 22 licenses spanning cultivation, processing, edibles, and distribution, Stem is truly a "farm-to-home" cannabis operator. The new home delivery business can leverage off Stem's existing manufacturing and dispensary business and vice versa, while the Company's award winning brands and proprietary genetics provide a competitive edge.Delivery: The New Old Way. The Driven acquisition provides Stem with the second largest cannabis delivery company in the nation's largest cannabis market and provides Stem with the opportunity to replicate the model in other states for itself or as a service to other established players in locations where Stem does not have a physical presence. With nearly 70% of consumers open to home deliveries, we see strong growth for this business.Significant Growth Opportunities. Today, Stem's two key markets are California, through its delivery options, and Oregon, through its retail dispensaries. We expect delivery to be expanded into Oregon in 1H21. Then we anticipate the Company to bring its "West Coast" model and brands to the East Coast and Midwest. Key states such as New York, New Jersey, Massachusetts, Pennsylvania, Illinois, and Michigan could double Stem's addressable market.Projections. Given the closing of the Driven merger at the end of the fiscal first quarter, ended December 30, 2020, the March quarter will be the first combined quarter. Management released estimated 2Q21 revenue of $12.9 million and gross profit of $5.23 million. We estimate this will translate into a loss of $2.1 million, or $0.01 per share. For the full fiscal year we are projecting revenue of $51.4 million and a loss of $0.04 per share, with fiscal 2022 forecasted at revenue of $100 million and net income of $0.05 per share. Read More >>