Canaccord Genuity analyst sets target price of $3.50 Canaccord Genuity analyst Kimberly Hedlin covers Flower One Holdings setting a target price of $3.50 per share: Flower One Holdings Inc. (FONE-CN) appears poised to become the dominant cannabis wholesale producer in Nevada, according to Canaccord Genuity analyst Kimberly Hedlin, who pointed to its “large-scale, high-tech cannabis production and focus on building market share through branding partnerships.”
“We see Nevada as a high-growth, culturally influential market (where branding presence is a must) and estimate a retail market of $0.9-billion by 2021,” she said. “Owing to Flower One’s differentiated branding strategy and scale, we expect the company to achieve relatively high wholesale margins and market share. We also see the potential for geographic expansion and believe an emerging trend toward specialization bodes well for the company, particularly as access to capital becomes constrained.”
Believing its “cost disruptive" production, which includes “industry-leading” design elements and large-scale capacity, as well as its first-mover advantage is likely to deter competitors, Ms. Hedlin initiated coverage of the Toronto-based company with a “speculative buy” rating.
“We also see Nevada as a culturally influential market where a branding presence is a must for top brands,” she said. "Additionally, we see a growing trend in the cannabis industry toward specialization, which we believe bodes well for Flower One.
“We are initiating coverage with a SPECULATIVE BUY rating given our belief that the company should achieve outsized margins and market share through its disruptive cost model, seed-to-shelf solutions for branding partners, and scale leadership in the Nevada market. Moreover, we see an opportunity to replicate the company’s strategy outside of Nevada, which could provide incremental upside to our target price.”
She set a target price of $3.50 per share, which falls short of the current consensus of $4.75.
“Following Flower One’s RTO in September 2018, the company’s share price has outperformed the Horizons ETF index, reaching a high of $3.50,” said Ms. Hedlin. "The stock saw a significant initial run-up following its $30-million equipment lease financing deal and continued to climb higher following its $57.5-million convertible debenture offering in March 2019. In our view, these transactions increased confidence surrounding execution relating to the Las Vegas greenhouse.
“We expect the recent stock performance is a function of current market sentiment. However, with revenues and business development opportunities expected to rapidly accelerate, we believe the current stock price provides an attractive entry point.”
Source: The Globe & Mail