Glass House Farms Dims View
- Alan J. Brochstein
- Aug 14
- 3 min read
I wrote about Glass House Farms (GLASF) in mid-July, right after the ICE raid, explaining why I did not like it at the lower price. Along with many other cannabis companies, the stock has soared over the last several weeks due to rescheduling of cannabis coming back on to the radar. Here is the action since June 30th for GLASF and the big (bad) ETF, MSOS:
I am quite negative on MSOS and all MSOs right now - too much, too quickly. I just posted the New Cannabis Ventures newsletter (free of charge to readers), and I discussed how the cannabis REITs make more sense than MSOS and the MSOs.
Q2 Was Solid
Q2 revenue was $59.9 million, up 11% from a year earlier. The company's press release indicated that results in the quarter were ahead of internal expectations. The cost of production plunged, gross margin consequently improved and adjusted EBITDA, at $18.1 million, was up 46% from a year earlier.
Investors should be aware of the filings. I am not sure why GLASF does not file with the SEC, but it does file in Canada. Here are the filings:
Q2 Financials
Q2 MD&A
The Outlook for Glass House Is Weak
The company held a conference call where it revealed its outlook: Q3 revenue is expected to plunge to $35-38 million. Q4 revenue will lift a lot, but the "below $53 million" is roughly unchanged to a year ago. Here is the transcript:
Ahead of the report, analysts, according to Koyfin, were projecting 2025 revenue of $213 million compared to $201 million in 2024. Adjusting for the decline in Q3, revenue will now be down for 2025 by 9% at the high-end of their updated guidance.
The company did not provide any guidance for adjusted EBITDA, which ahead of this report was projected to be down 9% for the year to $36.8 million. It will be lower now.
The Glass House Price Is Too High
Let's start with a chart from 11/5/24, the day of elections. MSOS is still down a lot since then, while GLASF is up slightly. Of course, GLASF has no exposure to Florida, but it did have the ICE raids and will now see lower revenue in Q3:
It closed last night at $7.55, which is down a lot from its recent peak in 2024, but it is way up from its lows in 2022. Here is the chart vs. MSOS since the end of 2022:
Investing is about a lot more than charts, but sometimes a chart is a good place to start. Let's discuss valuation. The company's filing suggest 72.3 million common shares and 4.8 million multiple voting shares outstanding as of 7/31. There are some other things to consider like warrants, RSUs and PSUs. Plus, there is preferred stock, which was issued in July. I don't have an exact fully-diluted in-the-money share-count, as I am not following it, but on just the shares outstanding and the RSUs, there are 81.4 million shares, giving it a market cap of $631 million. OUCH!!! The tangible book value as of Q2's end was $133.6 million, and this ratio is too high compared to peers like Green Thumb Industries (GTBIF). Using the enterprise value to the former projected adjusted EBITDA for 2025 is a ratio of 17.8X. UNREAL!
Conclusion
As I said in that article four weeks ago, I think this is a good company, but I don't include it on my 19-stock Focus List at 420 Investor. The news that has come out does not yet get me closer. IF cannabis is rescheduled, it will likely lower 280E taxation, but that is it for now, and it may not end all taxation of cannabis by the federal government, which could implement an excise tax.
The company's investors have talked up its entry into the hemp market and its ability to one day do interstate shipping, but neither of these things has made any progress yet. I will keep watching this one!
Additional Resources
