IIPR Black Book tomorrow at 2PM ET
We will be hosting a Black Book call on IIPR on Wednesday, September 16th, at 2PM ET.
IIPR, the only U.S. listed cannabis REIT, focuses on the acquisition, ownership, and management of specific industrial properties leased to experienced, state-licensed operators for their regulated medical-use cannabis facilities. We are bullish on the U.S. cannabis industry, and IIPR is well-positioned to ride the industry’s overall momentum through a growing pipeline of deals. The company currently owns 62 properties, at approximately 4.7M rentable square feet, and upwards to $1.1B in invested capital.
Since the year-end FY18, the dividend has been raised four times and has increased by 300.2%. While it seems the dividend growth has been incredible, the payout ratio has been maintained below 90% over the past four years. The stock is trading at a forward P/AFFO of 23.7, and as a result, its current dividend yield is 3.7%, and that is assuming management doesn't increase the next dividend.
IIPR has high-quality tenants, a conservative balance sheet, and a stellar management team that can execute.
IIPR was first added to the Hedgeye Cannabis Long Bias Bench on 5/29.
Event Details
Participating Dialing Instructions
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Confirmation Number: 13709268
CLICK HERE for webcast event details (includes video and materials link)
More Americans are using marijuana, but less concentrated among teens
Americans are using more marijuana, and the usage increase is concentrated among the ≥26 YOA cohort as opposed to the underage 12-17 YOA users. According to the federal government’s annual National Survey on Drug Use and Health, usage among 12-17 YOA, 18-25 YOA, and ≥26 YOA all increased in 2019.
Compared to a decade ago, the share of teenage respondents between the ages of 12 and 17 that reported past year marijuana use declined by 50 bps to 13.2% last year. In that same period, the 18-25 age group grew by 460 bps to 35.4% last year, while the share of adults 26 or over spiked by 750 bps to 15.2% last year.
These trends come as more and more states have legalized either medical-use or recreational, and contrary to the fears of anti-legalization groups, youths are not significantly increasing their usage of cannabis.
Charlotte’s Web misses Q2 estimates (CWBHF)
Charlotte’s Web, the market share leader in full spectrum CBD hemp extract products in the U.S., reported Q2 consolidated revenues of $21.6M vs FactSet Consensus $23.5M, a -13.2% decline YoY. Q2 Adjusted EBITDA was -$5.7M vs FactSet Consensus -$3.9M, a -246% decline YoY. The company attributed the loss to COVID-19 impacting retail and health practitioner channels with lower foot traffic and temporary location closures. The pandemic also disrupted production and manufacturing operations. OpEx soared 82.1% YoY due to the company’s investments in capacity expansion to transition towards a more traditional CPG company capable of supporting growth in the mass retail channel. However, strong DTC sales largely offset a 54.5% decrease in B2B retail sales which accounted for 28.2% of total revenue in the quarter. DTC net sales grew by 33.6% year-over-year as online traffic and high conversion rates increased through ongoing marketing and social media programs. YoY, new consumer acquisitions increased 25% and conversion rates increased 77%. DTC net revenue accounted for 71.8% of total revenue in Q2 compared to 46.4% for the same period in the prior year.
CFO Russ Hammer commented, “We are seeing improvements and a stronger back half in our DTC channel, but without a meaningful opening up of the economy and health practitioner channel we expect only flat to modest consolidated net revenue growth for 2020. Our long view market opportunity remains intact and we continue to add new customers, doors, and products. Our Q3 revenues are trending ahead of Q2 sales levels and we anticipate reopening of retail locations in the U.S. will support a positive growth trend. As we see resolutions in COVID-19 and hemp CBD regulations or legislation we can see the category build towards its full potential.”
The stock traded down 6.19% yesterday, and we remain skeptical of the stock at current levels.
