On Thursday, Benchmark adjusted its outlook on Medicine Man Technologies (OTC: SHWZ), reducing the share price target to $2.50 from the previous $3.00, while still holding to a Buy rating on the stock. Medicine Man Technologies, which operates as Schwazze, revealed its financial results for the fourth quarter and the entire year of 2023, showing a full-year revenue of $172.4 million.
The company also reported an operating income of $3.3 million and an adjusted EBITDA of $53.4 million, which is 31% of the revenue. Additionally, Schwazze generated $12.2 million in operating cash flow during the year.
Despite these annual figures, the company's performance in the fiscal fourth quarter did not meet consensus expectations in terms of revenue and profitability. This shortfall marked a disappointing end to the year for Schwazze.
The analyst from Benchmark pointed out that while the Drug Enforcement Administration (DEA) seems ready to reschedule cannabis, which could be a significant step towards federal legalization and provide some relief regarding tax code 280E, the certainty and impact of such a move are less assured than some advocates hope.
The company's fourth-quarter results contrast with the overall annual performance, which was otherwise strong, with a substantial adjusted EBITDA margin. The DEA's potential rescheduling of cannabis is a notable backdrop for the company's future, yet the precise effects of this potential federal action remain uncertain.
Schwazze's financial disclosures come at a time when the cannabis industry is closely watching regulatory developments. The company's ability to generate a significant adjusted EBITDA relative to its revenue highlights its operational strengths amidst a challenging quarter.
Despite the missed expectations in the fourth quarter, the Benchmark analyst maintains a Buy rating, suggesting confidence in the company's long-term potential, albeit with a moderated short-term price target.
InvestingPro Insights
As Medicine Man Technologies, known as Schwazze, navigates the complexities of the cannabis market, real-time data from InvestingPro provides a deeper understanding of the company's financial health and stock performance. With a market capitalization of $68.15M and a notable revenue growth of 16.14% in the last twelve months as of Q3 2023, Schwazze demonstrates its ability to expand amidst a challenging industry landscape. Despite an adjusted P/E ratio of -2.47 indicating that the company is not currently profitable, the strong revenue growth suggests underlying operational strengths.
InvestingPro Tips highlight that Schwazze's stock has experienced significant volatility with a price total return of -23.48% over the last month, yet it has shown resilience with a robust return of 49.15% over the last three months. Analysts are cautious, not expecting profitability this year, which aligns with the company's recent quarterly performance that fell short of expectations. However, the company's strong free cash flow yield, as implied by its valuation, is a positive signal for investors looking for potential value in the stock.
For those interested in a more comprehensive analysis, InvestingPro offers additional tips on Schwazze's stock performance and financial metrics, which can be accessed with a special offer. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and explore the full range of insights that InvestingPro has to offer.
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