Finding the next Jushi (549% 12-month return) – Part 4: Harborside

In Part 1, with the help of my Cannabis Investor Portal, I narrowed 29 cannabis stocks down to 11 companies with less than $400 million in market cap and a price-to-sales (P/S) of 5 or less. In Part 2, I eliminated the 5 companies I felt would do well in the future, but not gain 549% in the next 12 months. I will now cover the final six – each with their own article and analysis on why I think a 549% is possible. Hollister Biosciences was the first and now I review Harborside.

The Harborside Group (OTC: HBORF, CSE: HBOR)

Price target to gain 549%:  $12.79 (from $2.33 cents)

Full Disclosure: I started a position in Harborside at $1.88.

Harborside will soon be a single-state operator with a strong presence in California. While the company has six dispensaries (five in California and one in Oregon), wholesale in California is now its core business. Most recently, they announced that they are divesting from their Oregon dispensary to focus on California.

Financials

While Harborside’s retail store sales remain flat at $40 million in yearly sales, their wholesale business is booming, growing from $2.2 million in sales Q4 2019 to $8.9 million Q3 2020 – 305% growth.

Harborside quarter financials table. Note: revenue numbers include excise tax.

Harborisde’s Adjusted EBITDA has grown from $642,025 to $4,473,046, or 597%. While the company’s overall margins have increased every quarter, the wholesale margins have grown from 17.7% to 60.3% over the past three quarters.

Harborside gross margins

Low outstanding share count and price-to-sales (P/S) multiple

The average cannabis company on my Cannabis Investor Portal has 258 million shares outstanding, but Harborside has 43 million. By comparison, Curaleaf has around 700 million and 4Front Ventures has 698 million. The average cannabis stock sits at an average P/S of 11 while Harborside trades at 1.3, the lowest of 31 companies on my list. If Harborside’s stock grew 800% from here, it will still sit below 11 P/S.

Know the risks

The company’s share price is likely depressed because within two weeks time Harborside announced the departures of co-founder Steve DeAngelo and Chief Operating Officer Greg Sutton. These are significant departures that should not be taken lightly. Additionally, a class-action lawsuit was dismissed on Jan 21. Finally, Harborside is consolidating into California, the largest U.S. market, but also the most competitive.

Up next: MariMed.

NOTE: Micro-cap stocks are speculative in nature and this article should not be considered advice to buy the stock. Do your own research and consult a financial expert before investing.

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