The Fire and Flower (TSX:FAF) cannabis company remains a long-term bet in the cannabis retail market after its stock gained 150 percent since April 2020. Shares of the cannabis retailer are currently trading at $1, which is a change of $-0.01(-1%) at the time of writing. The company has a market cap of $156 million, putting it in a good position to soar even higher in the upcoming decade.
Structural challenges
In the last 15 months, the cannabis sector has experienced a number of structural issues including a diving demand, a growing black market, and the launching of retail stores in major Canadian provinces. This situation gave way to high inventory levels and increasing losses. The COVID-19 pandemic further compounded the scene, driving pot stocks to multi-year lows.
However, amid all this, Fire & Flower cannabis retailer continues to capture a noticeable share of the Canadian market. The company focuses on building an independent retail chain that provides consumers with cannabis products and accessories.
With licensed cannabis retail stores in Manitoba, Saskatchewan, Ontario, and Alberta, the company also aims to expand its territories to British Columbia and other provinces focusing on the sale of retail cannabis. By the end of Q1 this year, Flower and Fire had 46 retail stores and 13 pending licenses.
The company aims to have 118 retail stores by the end of 2021. Currently, it’s focusing on expanding in the Ontario and British Columbia markets, which are Canada’s dominant provinces in terms of population.
A growing number of retail outlets
Flower and Fire have had an increasing number of retail stores, which has helped it increase its sales from $13 million in 2019 to $51.1 million in fiscal 2020. According to analysts, the sales projection for the company is $107,4 million in 2021 and $227 million in 2022.
In the first quarter of financial year 2021, “Fire and Flower reported $23.1 million in sales, which is an increase of 142 percent year over year. Comparatively, its gross profit rose 105% to $7.5 million, indicating an increase in the cost of goods sold,” as Motley Fool earlier reported.
In the same period, the general and administrative expenses of the company went up 46 percent at $8.8 million while operational losses increased to $9.7 million, from $5.29 million in the prior-year period. A non-recurring impairment charge of $4.27 million contributed to the increase in the operational loss.
With these figures in mind, analysts expect Fire and Flower’s net loss to narrow down from $0.17 per share in 2021 to $0.03 per share in 2022.
Analysts expect the company’s net loss to narrow from 0.17 a share in 2021 to $0.03 a share in 2022.
