MedMen Stock (CSE:MMEN) (OTCQX:MMNFF) Reverses Course And Looks Destined For Greater Highs

After plunging to its all-time lows in late October, MedMen Stock (CSE:MMEN) (OTCQX:MMNFF) has reversed course and now looks destined for greater highs. The stock has notched two positive closings in the last three sessions, an indication of a bounce back. The recent gains have seen the stock pull up from the $1.00 bottom it sank to on October 31 to $1.20 on November 4. Notably, MedMen bounce back comes on large volume, showing strong investor interest in the stock.

About MedMen Stock

MedMen Enterprises was founded in 2010. It bills itself as a premium cannabis retailer. MedMen has operations across the United States and runs flagship stores in Los Angeles, Las Vegas and New York. MedMen says its mission is to provide an unparalleled experience that invites the world to discover the remarkable benefits of cannabis. The company believes that a world where cannabis is legal and regulated is not only safer, but healthier and happier.

The decline that took MedMen to its record lows begin unfolding on October 8. If we look at MedMen’s investor relations page and go to press release section where it publishes updates about its business activities and developments, we see that the company made several important announcements in October.

The first major announcement came on October 8, and in it MedMen informed investors that it decided not to proceed with its proposed acquisition of PharmaCann. MedMen announced its intention to acquire PharmaCann on December 24, 2018. MedMen provided several reasons why it decided not to proceed with the acquisition of PharmaCann, including that it has found a better way to create greater value for shareholders than purchasing PharmaCann. The company went on to state that terminating the proposed acquisition of PharmaCann will free up its balance sheet to allow it to invest more in building its brand and developing its retail network. Moreover, MedMen said it actually gained from terminating the merger agreement because it will now take PharmaCann’s retail and cultivation assets in Virginia and Illinois.

On October 28, MedMen made another major announcement. The company released financial results for its fiscal 2019, which showed triple-digit revenue growth and an impressive margin improvement. MedMen’s revenue for fiscal 2019 increased 227% from the previous year and gross margin jumped to 47% from 35% in the previous year. MedMen is currently making losses but the company has set its sight on profitability.

“Our success was due, largely in part, to our loyal customer base. Throughout the year, we served over one million customers from all 50 states and more than 100 countries. In California…MedMen surpassed a record $110 million in annualized run-rate retail revenue,” commented Adam Bierman, CEO of MedMen.

Another major announcement from MedMen came on October 29. On that date, MedMen provided an update on its credit facility arrangement with Gotham Green Partners. Specifically, MedMen said it amended the credit facility to minimize dilution to is stock and boost its balance sheet flexibility. Also in October, MedMen announced expansion of its retail footprint with the opening of new retail locations in Florida.

Investors ignore positive updates from MedMen leaving the stock to plummet to record lows from where it looks set for a strong comeback

The updates that MedMen provided in October did little to provide upward lift for its stock, as the stock moved up only a little but then resumed its downward spiral. However, if you analyze the charts, it is hard to dispute that MedMen looks set for a powerful bounce back from its current levels. And history supports that.

As it rebounds, MedMen has found critical support at $1.0. The stock’s immediate resistance stands at $1.4, which if breached should confirm a bounce back. Breaching this resistance should pressure short-sellers who bet against MedMen to rush to cover their positions before their losses mount. A rush by short-sellers to cover their position should create a powerful short squeeze in the market.

Bottom line

A look at the charts shows MedMen stock has rock solid support at the the $1 level. We believe that the lows are indeed in for MedMen stock and higher prices are ahead. When it comes to investing, it is important to pinpoint when a stock is about to break out, and we are at that point now.

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Disclosure: We have no position in MedMen stock and have not been compensated for this article.