Gauge the Growth For Yourself on This Cannabis Stock

When Gage Growth Corp. (CSE:GAGE) debuted trading in early April, the Market had no idea how the business was really doing as the last set of financials and numbers were from September last year—seven months ago.

Well we sure got updated today: 2020 revenue was US$39.9 million, which was up 1,972% YoY. Q1-21 numbers are expected to be up more than 60% from Q4-20.

Then, they said just March revenue is more than US$7.5+M (that’s at least $90M annualized), with each dispensary selling roughly US$1.3M. And April revenue is expected to be up 5-6% over March. So the Year-End run rate will likely be a lot more.

In my article, I said that it was possible they could get to 5 ,000 pounds of flower per month by Year End. 

Now they’re saying 7,000 pounds—lending credibility to the idea that Big Growth will continue throughout the year and certainly carry over in 2022. They have a combined 8 cultivation facilities in operation today (three operated and five contracted), and will have 13 by Year End.

Gross margin was 30.8% in 2020, which should go up BIG in Q2 and 2H-2021 with scale. 

Helping that will be their own processing asset which is expected to go live in Q3 this year. 

Most of their extract products today come from third parties—by definition that has lower margins that making it yourself. So once third party extract products are replaced with in-house products, you’ll see a huge margin improvement for their extract products.

Michigan is on track to be the #3 market in all the USA in 2021. The state just posted an eye popping $146 million of cannabis sales in March alone. That’s $1.8 billion annualized, which is the third largest cannabis market size in the USA.

Maybe that’s why GAGE was able to sell US$505,000 from just seven stores in a single day on April 20 (“4/20”). It has a fully diluted market cap of just US$450 million. Compare that to 4/20 sales of much larger market cap companies:

Planet 13 – US$543,000 in 4/20 sales / US$1.4bn FD market cap

Ayr Wellness – US$1.2 M in 4/20 sales / 50 stores / US$2bn+ FD market cap

High Tide – CAD$775,000 in 4/20 sales / 85 stores / CAD$600M FD market cap

I think GAGE is one of the best growth stories—and underappreciated growth stories—in the US cannabis space. While a lot of 2020 memes are tired, cannabis will have the numbers to keep the fun going for investors.