... we expect Choom to report strong revenue... Choom: A Cannabis Retail Story to be Watching
Choom Holdings (CHOO.CN) (CHOOF) started as one of the most talked about cannabis retails in Canada and a lot of the excitement was related to the strategic relationship that it entered into with Aurora Cannabis (ACB.TO) (ACB). During the last quarter, Choom has lost some of its luster and the market has turned slightly negative on the opportunity.
Although the recent trend has been to the downside, we believe that Choom has attractive growth prospects. At current levels, we are of the opinion that Choom is trading at a substantial discount to its peers and we are favorable on the risk-reward profile. We believe that Choom was impacted by Aurora Cannabis’ recent decline and expect the weakness to be transitory.
A few weeks ago, Choom reported an important development and announced the opening of their next licensed cannabis retail store in Alberta. The company has been highly focused on this province and we are favorable on the position that it has in it. The store represents Choom’s 13th location and we are favorable on the way the management team continues to open new outlets.
During the last two months, Choom has been nothing short of an execution story from an operations standpoint. During this time, the company opened four new cannabis retail stores and we are favorable on the amount of revenue that can be generated from these locations. Over the next year, we expect Choom to report strong revenue growth and the opening of new stores will continue to have a significant impact on the fundamentals of the business.
2020 has already proven to be a great year for the Canadian cannabis retailer and momentum has been trending to the upside. In 2019, Choom was highly focused on execution, but the market did not seem to care and the shares traded lower with the market. We believe that Choom is well positioned for growth on a going forward basis and will monitor how it benefits from the relationship that it has with Aurora Cannabis.