US Cannabis Firm in ‘State of Flux’

With several market factors working against Stem Holdings, its future is uncertain, noted a Noble Capital Markets report.

In fiscal year 2021 (FY21), Stem Holdings Inc. dba Driven By Stem (STEM:CSE; STMH:OTCQX) more than doubled its FY20 revenue but still remains unprofitable, reported Noble Capital Markets analyst Joe Gomes.

He highlighted that the company’s near-term future is clouded, in part by the cannabis environment in its key markets, Oregon and California. Overall sales in Oregon have dropped to pre-COVID levels, and the California cannabis market is in crisis.

“With the December 2021 divestiture of Driven Deliveries, we expect Stem to get back to its roots (i.e.,) its Oregon and California businesses,” noted Gomes.

The company plans to do just that this fiscal year, double down on those enterprises and on its grow businesses. Management is confident it can improve in those areas, but as Gomes noted, the “timing of such is unclear.” Stem’s newly obtained license to sell recreational cannabis in California should help sales (previously, it had only been selling medical marijuana in the state). However, Stem’s single location in California is a disadvantage when competing against operators with multiple sites in the state.

Stem has ownership in other entities in more than a handful of other states, and it is unknown what will happen with all of those, Gomes pointed out. Management indicated it may dispose of the ones in which it cannot obtain 100% ownership. This situation also clouds Stem’s future.

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