Delta 9 Cannabis DLTNF Stock Forecast & Analysis

Delta 9 Cannabis, DLTNF stock is a Canadian cannabis company that is in a transformative phase.  Delta 9 Cannabis just recently closed on a 17-store deal that will be immediately accretive.  And, Delta 9 Cannabis also restructured a facility giving themselves $10M in cash on hand, as well as additional working capital.  This restructure puts DLTNF stock in pole position for big moves forward.  I wanted to do the DLTNF stock forecast to get this set up.  However, immediately, DLTNF stock is outdated with the new acquisition hitting and likely showing up in Delta 9 Cannabis’ next financial release.

Nonetheless, I have wanted to take a solid look at DLTNF stock and do the DLTNF stock forecast as a basis to start.  Remember, investing is not an event, it is a process. Starting from this point, we can continue to build guidance for DLTNF stock.

A little on Delta 9 Cannabis transformation

When you look at Delta 9 Cannabis numbers (below), they are in a solid position and growing.  But, this all changes quickly and, with 17 dispensaries in their fold, this will improve Delta 9 Cannabis margins considerably.

I have always been a huge proponent for companies having their own dispensaries.  Initially, I wondered on the “vertical” benefits for these companies.  I had applied the thought process that retailers would be best as retailers.  And, manufacturers would be able to really optimize their companies with focusing on that main aspect.

But, a producer having its own dispensaries is proving to be key to optimizing margins by controlling the entire process.  As I have mentioned time and time before, being able to produce excellent cannabis, inexpensively, consistently, is very difficult.  So, as cannabis companies shift toward being more than just a producer, they take more control of the entire process.

Now that Delta 9 Cannabis is becoming a producer with what is now 17 dispensaries, they are taking on more control and, this will really be impactful.

Margins will improve

When you think this through, Delta 9 Cannabis and Sam’s Club Dispensaries are very likely to be in much better shape after this deal concludes and the two companies start working together.

All of a sudden, Delta 9 Cannabis has 17 new dispensaries to sell its products in. The benefits are that Delta 9 cannabis will get gross margins from all three aspects of production.

Growers

Some cannabis companies exclusively produce product for other companies.  In fact, when you look at Canadian cannabis companies, this is what companies such as Aurora Cannabis ACB stock and Canopy Growth CGC stock targeted.  These two behemoths thought that they could simply create production capacity of millions of kilograms of cannabis and sell to various others who are merely looking for the THC in a base form that they can then use as an ingredient for their premium products.

This strategy did not work out for any of the cannabis companies in Canada, such as Aurora Cannabis and Canopy Growth.  There is nothing premium about this approach and THC becomes commoditized.  Any sales would still command some form of gross margins.  But, if the product is commoditized, the margins could in fact, and did, go negative.  Not exactly a profitable way to run a business.

Sadly, I still see this same approach being tried in other areas here in the US.  Crazy.  No one learns from mistakes.

Producers

You also have the above-mentioned producers that take the base THC ingredient and incorporate that into a product such as a bit of chocolate, sodas, or other edible.  Then, that producer would create a premium label product that could command higher sales points.  And, at this level, there are sales and gross margins, just like there are with growers.

Dispensaries

No matter who you are, if you want a cannabis product to consume, there is some kind of licensed dispensary necessary for this.  Delta 9 Cannabis is now that company.

But, Delta 9 Cannabis is also the other two mentioned aspects of a cannabis company: grower and producer.  Being vertical like this means that a company is now grower, producer, and dispenser.  They get all three levels of margins and can control these margins better.

Delta 9 Cannabis Financial Data

Here is the latest financial data for Delta 9 Cannabis.  However, and as I have mentioned previously, immediately any analysis on DLTNF stock forecast is obsolete simply because the dispensaries are going to add in considerable revenue gains, margins will shift as such, and, there is going to be a different share count.

This analysis of DLTNF stock forecast takes into consideration scaling up of just the core company in its current form; without the dispensaries.

Delta 9 Cannabis Gross Profits

I tried to envision the future revenue with the dispensaries.  Are these dispensaries selling $1M per quarter each?  Without this information it is nearly impossible figuring out the future potential of the combined companies.  But, if each of the 17 dispensaries is printing $100K in revenue per month, that would be about $5M per quarter added to the top line revenue for the combined companies.

Again, the DCF calculation was done without consideration of the dispensaries added in.  I will continually update this as the company progresses forward.

Delta 9 Cannabis Operating Profits

Here is where a lot of potential cost savings starts, operating costs.  You only need one CEO.  And, maybe there will be cuts to the sales area of the combined companies.  Or, maybe not.  Nonetheless, this is the beginning of where we should see an advantage in combining companies; outside of the concepts I tried to explain in the intro to this.

Delta 9 Cannabis EBITDA & Net Profits

I went ahead and did the DLTNF stock forecast despite not having consistent EBITDA numbers.  Looking at what was printed already, I used a softer 15% EBTIDA rate for 2022 and then progressively increased this rate slightly as the years progressed and the potential of higher profit rates exists.

At the same time, I would imagine a dispensary system with 17 dispensaries is at the very least EBTIDA profitable.  Will revenues be significantly higher for the dispensaries versus the core Delta 9 Cannabis company?  We do not know at this time and, this is something I will be keying in on regularly.

Delta 9 Cannabis Cash On Hand

Along with the transformative deal that is bringing in 17 dispensaries, Delta 9 Cannabis also brought in some working capital of ~$10M in cash and a funding facility of an additional $30M for working capital. Given that, Delta 9 cannabis is well-capitalized moving forward from this perspective of funding operations.

But, from a cash:debt ratio, the number is not the best given the complete list of cannabis stocks – ranked.  Hopefully there is not too much debt that Delta 9 Cannabis is about to take on with the new acquisition.  But, we will get these numbers later over the next two quarters and will be able to assess then.

Delta 9 Cannabis Total Equity

Up until this deal, total equity had been trickling lower and lower.  This is one of the first things I look at.  If a company’s total equity is increasing, then total revenues will most likely be increasing as well.  Assets are what drives the potential of revenue.  And, if a firm can balance asset growth versus growth in debt, then potentially this is a growth stock that is balanced and will produce results.

But, this is one of the pieces of the puzzle.  As you analyze a stock, you need to incorporate all of the pieces collectively.  For now, equity is trending lower and lower.  But, the new dispensaries will push equity higher.  And, hopefully this is a foundation for pushing DLTNF stock higher.

What we do not know is the make up of assets & debt for Delta 9 Cannabis.

Delta 9 Cannabis DLTNF Stock Forecast

Delta 9 Cannabis DCF

If Delta 9 Cannabis were to get themselves to a point where they were to scale up operations, achieving economies of scale, improving gross margins and elevating them toward profitability, DLTNF has upside potential.

Now that Delta 9 Cannabis is working in dispensaries, their margins will improve significantly.  This is the shift that I am going to looking toward.  With DLTNF stock, this is the beginning of me looking forward as to what Delta 9 Cannabis can do.

However, there will be a shift in share count (This has already occurred) and, when I get the new share count along with the new revenue numbers, I will update the DLTNF stock forecast as a long term value investment.

Is Delta 9 Cannabis DLTNF Stock A Good Investment?

At the current price, and since the transformative change has already concluded, the new share count is in place.  What we do not know is how much revenue will be coming in.  Nor do we know the new margins and how this will affect the bottom line for Delta 9 Cannabis and DLTNF stock forecast.

As a value investment, I like where Delta 9 Cannabis sits right now.  First, the downside is limited to $0.19 per share.  That is not to say the downside is not impossible.  But, cannabis federal legalization is upon us and my expectations are that there is going to be a lot of interest all over again in cannabis stocks.

Many are frustrated beyond believe at how brutalized cannabis stocks have gotten in the past several months.  However, the flip side to this is that no one is paying attention to cannabis stocks.  And, when cannabis federal legalization hits, it will catch almost everyone off-guard.  There will be a mad rush back into the sector pushing these stocks to obscene levels to the upside.

The current disposition could be seen as horrific… or, the opportunity of a lifetime.

I think I am going to add some DLTNF stock into my own personal portfolio; probably a small position.

Delta 9 Cannabis Financial Data

Delta 9 Cannabis Financial Data