Schwazze (SHWZ) – In for the Long Haul

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Friday, May 17, 2024

Schwazze (OTCQX:SHWZ, NEO:SHWZ) is building a premier vertically integrated regional cannabis company with assets in Colorado and New Mexico and will continue to take its operating system to other states where it can develop a differentiated regional leadership position. Schwazze is the parent company of a portfolio of leading cannabis businesses and brands spanning seed to sale. The Company is committed to unlocking the full potential of the cannabis plant to improve the human condition. Schwazze is anchored by a high-performance culture that combines customer-centric thinking and data science to test, measure, and drive decisions and outcomes. The Company’s leadership team has deep expertise in retailing, wholesaling, and building consumer brands at Fortune 500 companies as well as in the cannabis sector. Schwazze is passionate about making a difference in our communities, promoting diversity and inclusion, and doing our part to incorporate climate-conscious best practices.

Joe Gomes, CFA, Managing Director, Equity Research Analyst, Generalist , Noble Capital Markets, Inc.

Joshua Zoepfel, Research Associate, Noble Capital Markets, Inc.

Refer to the full report for the price target, fundamental analysis, and rating.

1Q24 Results. Revenue of $41.6 million was up 4% y-o-y, driven by new store growth. Gross margin declined to 43.1% from 54.6% due to pricing pressure in New Mexico and a higher mix of lower margined medical sales. Schwazze reported an operating loss of $2.7 million compared to $5.6 million of operating profit in 1Q23. GAAP net loss totaled $18.2 million, or a loss of $0.24/sh, versus essentially breakeven last year. We had estimated revenue of $42.5 million and a net loss of $11.6 million, or a loss of $0.16/sh.

Environment Still Challenging. The Colorado and New Mexico markets remain some of the most competitive cannabis markets in the country. A supply/demand situation still coming into balance and too many retail locations will continue to impact both markets in the near-term.

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This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).

*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision. 


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