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By Rachael Green, Benzinga
After filing its interimfinancial report with the Canadian Securities Administrators earlierthis month, CordovaCann Corp. (OTCQB: LVRLF) lookswell-positioned to increase profitability in the year ahead. CordovaCann is an Ontario-based cannabiscompany with operations in retail, processing, and production inCanada and the United States. The Company is currently focused onramping up retail expansion, increasing production, and forging newpartnerships, all of which are aimed at driving profitability for theemerging cannabis company.
CordovaCann Is Nearing The Inflection Point OfProfitability
CordovaCann is already operating a network of retail stores,manufacturing facilities and cultivation sites across three U.S.states and four Canadian provinces, and the company has its sights seton expanding into new jurisdictions through a mix of building newstores and acquiring existing businesses across North America.
Its most recentexpansion efforts yielded 30% year-over-year revenue growth from 2021to 2022, with its new stores averaging a short payback period of just8-12 months. It plans on materially adding to its current storenetwork, targeting profitability later this year. The companyestimates that it needs another 3-5 Canadian stores to achievecorporate profitability, adding to the 4-wall profitability of thecurrent retail platform. Some of these additional stores will likelybe brought under the CordovaCann umbrella via acquisitions.
The Canadian cannabisretail stores operate under the brand name of Star Buds Cannabis Co.and generate some of the best margins in the industry. The company hasfocused on small footprint stores, diverse inventory, knowledgeablestaff, and low overhead costs to drive these strong margins. Thesemargins can be further increased with data services agreements withlicensed producers and manufacturers, and the company is just startingto leverage this opportunity. Given that data revenues are responsiblefor a large part of the income of other comparable cannabis retailersin Canada, this move is expected to be a significant tailwind as thecompany moves toward profitability.
It’s also hoping to establish a retail presencein the U.S. before the end of the year. Management believes it cantake advantage of distressed acquisition opportunities in both Canadaand the United States. CordovaCann is currently eyeing undervaluedbusinesses and believes it can pay 2x-5x trailing annual EBITDA(earnings before interest, taxes, depreciation, and amortization) forvery attractive acquisitions. These acquisitions would be accretiveand should complement the company’s existing expansion and growthstrategy.
Anothergrowth opportunity is the recent partnership with DoorDash (NYSE: DASH). Last Summer, Star Buds Cannabis Co, operating underCordovaCann, partnered with the major local delivery app to make its cannabis productsavailable through the app. A limited launch in Ontario has alreadyyielded some success but full-scale implementation of the partnershipis still on hold, likely until U.S. cannabis banking laws are betterdefined. Still, the potential of this partnership to increase brandrecognition and sales at the same time makes it an exciting growthopportunity for the cannabis stock.
A similar move to grow sales and brand recognitionis underway via partnerships with major convenience store chains.While the compliance challenges are still a key hurdle to overcome,many convenience store brands are eager to add products to theirinventory that get consumers to stop, and cannabis fits this bill.CordovaCann has the potential to participate in convenience storesales of cannabis products and also has an opportunity to become theirpreferred supplier.
The near-term opportunities for CordovaCann present anoptimistic outlook on CordovaCann’s ability to generate betterprofitability and gain a stronger financial position in the comingyear, which could help bolster the cannabis company’s stock.
This article wasoriginally published on Benzinga here .
CordovaCannis building a leading vertically integrated cannabis company focusedon the North American market.
This post containssponsored advertising content. This content is for informationalpurposes only and not intended to be investing advice.
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