STMH - Stem Holdings (STMH)(STEM:CA) - California E-Commerce and Delivery Expansion

California Expansion. On the heels of last weeks expansion in Oregon, Driven by Stem has received a non-storefront license to open a distribution hub in Mendota, located in the county of Fresno, enabling it to provide better service to consumers with its Budee e-commerce platform in four key counties in Northern California, home to 2.3 million residents.Benefits. The expansion is expected to drive topline sales with greater efficiency, as the Company anticipates savings of up to $1 million in operating expenses, with significant savings in gross receipt taxes. The Company plans for the Mendota hub to become operational in October through a new 2,000 square foot facility, which will be dedicated to delivery service in 60 minutes or less.Fresno & California Market. Earlier this month, Fresno finally approved retail cannabis in the city, approving 21 retail licenses. We expect the Fresno market to quickly grow with the new approval and be an attractive market for Driven by Stem. Overall, California remains the largest cannabis market in the U.S., with estimated adult use sales in the $4.7-$5.5 billion range and projected to grow up to $6.5 billion over the next couple of years.Maintaining Outperform. In spite of a slower than anticipated revenue ramp, we are maintaining our Outperform rating and a $2.00 12-month price target. We believe the Company's 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 providing Stem with not only a first mover advantage but a defensible moat. Read More >>