Jushi Holdings Inc (OTCMKTS:JUSHF) announced plans to expand its cultivation and production facility in Pennsylvania. Analyst Bobby Burleson of Canaccord Genuity believes that expansion will better position the cannabis company to support strong growth going into the end of this year.
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Details on Jushi's expansion
Previously, the company expected to have 98,000 square feet of canopy for growing cannabis, but that amount has increased to 110,000. Burleson said there could be some level of positive impact this year, as phase one of the project is expected to be completed by the fourth quarter.
However, that also means most of the increased revenue potential will likely come next year. The analyst noted that Jushi Holdings is bringing in 10,000 square feet of additional canopy in a state with low-to-high $3,000 per pound wholesale pricing. The company receives about 40% to 50% of its revenue through the wholesale channel.
Burleson added that the increased output follows the facility expansion, with the first quarter of next year seeing a modest impact. Impacts from phase two will start to be felt during the second quarter, and the full impact of the expansion will run into the second half of the year. At this time, Burleson is estimating $103 million in revenue from Pennsylvania this year and $165 million next year.
Strength in Illinois too
For now, Jushi's new stores in Illinois and March sales numbers suggest a strong first-quarter earnings report. Burleson said retail cannabis sales numbers from Illinois have been strong in recent months, but he's leaving his first-half estimates the same in hopes of an upside scenario.
Although there have been concerns about supply constraints in Illinois, Burleson doesn't believe the company experienced any shortages. He noted that Jushi Holdings has some of the best-performing stores in Illinois, including two in Sauget and two in Bloomington.
Capacity at clubs in Sauget is up to 50%, and Burleson believes the company is seeing healthy trends at its biggest revenue contributors. Other sources of potential upside this year include flower wholesaling in Virginia, which should start in the coming months.
He rates Jushi Holdings as a Speculative Buy with a $10 price target. The shares declined by about 1% during morning trading hours, falling alongside other cannabis stocks. Tilray Inc (NASDAQ:TLRY) slipped by more than 3%, while Aurora Cannabis Inc (NYSE:ACB) declined by almost 3%. Cronos Group Inc (NASDAQ:CRON) was down by nearly 2%, and Canopy Growth Corp (NASDAQ:CGC) fell by more than 2%.
