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Supreme Cannabis On Track For 400% Sales Growth For 2019

Based on its most recent update, Supreme Cannabis (FIRE.V) appears to be on track to reach its goal of 25 flowering rooms by March 2019 for its 7Acres Facility.  This should produce revenue growth of over 400%.

The company announced it has completed 19 flowering rooms as of December 2018.  Further anticipating the opening of additional rooms by:

  • January 2019 – 3 additional flowering rooms
  • February 2019 – 1 additional flowering room
  • March 2019 – 2 additional flowering rooms

This will bring the total to 25 flowering rooms and a total of 300,000 square feet in its 7Acres Facility and annual production to 50,000 kilograms from its capacity of 13,300 kilograms as of the end of fiscal 2018.

Supreme Cannabis finished 2018 at a price of $1.37, down a harsh 49% for the year.  With a market capitalization of $395 million at year end, this brings a forward price-to-sales multiple of approximately 12x.  It should be noted the revenue expectations are contingent upon approval by Health Canada for its flowering rooms. 

As noted in our coverage of the first day of trading for 2019, January has started with a volatile opening for the broader markets.  Supreme Cannabis managed a positive first and second day closing at $1.49.  The broader markets however had a very painful day driven by Apple Inc.’s revenue and earnings downgrade.    The S&P 500 was down almost 2.5% in Thursday’s trading. 

It remains to be seen if companies like Supreme Cannabis can shake off the effects of the markets by delivering on what should be exceptional growth in 2019.  Or in the end succumb to the market turmoil.  One thing appears to be certain – even if we enter a global recession, sales of cannabis will continue to boom given the low base from which they are starting.  Perhaps a recession may help put a lid on costs.  Certainly energy prices have come down significantly since October with oil now trading below $50 a barrel. 

The future for the industry remains bright and whatever happens in the next few months in the market, at some point it becomes impossible to ignore triple digit revenue growth.

Written by Jason Bagg

Mr Bagg has over 20 years experience in financial services ranging from Capital Markets to Private Equity. Mr Bagg has helped clients build wealth, reduce taxes and plan for retirement. Drawing on his experience, Mr Bagg has spoken on different panels regarding investing and has written numerous due diligence reports and white papers in this area.

Image by jp valery for unsplash

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