In this week's "Rising High," The Fly's recurring series focused on cannabis stock news, The Fly looks back at a lift on a Florida acquisition, a supply agreement and analyst view.
GROWGENERATION ACQUIRES HEALTHY HARVEST: GrowGeneration (GRWG) announced Wednesday that the company has purchased the assets of Healthy Harvest. Healthy Harvest's owners will be staying on as director of Southeast Region and director of Latin American Markets, the company said. "The Healthy Harvest acquisition is our 1st in 2020, adding an accretive $12M in revenue to our company. Healthy Harvest is the largest hydroponic operation in the Southeast, which strengthens our position in this region and opens the Puerto Rico, Caribbean, and South American markets," said CEO Darren Lampert.
DELTA 9, AUXLY ANNOUNCE SUPPLY AGREEMENT: DELTA 9 CANNABIS (VRNDF) announced Tuesday that it has entered into a supply agreement with Auxly Cannabis Group (CBWTF). The company will supply Delta 9's retail stores with a suite of cannabis 2.0 products including cannabis oils, chocolates, chewables and vape products, where permitted. Auxly and Delta 9 entered a strategic partnership in September, 2018, including a supply agreement which granted Auxly the right to purchase up to 5,000 kilograms of cannabis and 500 kilograms of cannabis trim per year until July 1, 2030. In exchange, Auxly invested $16.25M in the company by purchasing 5,909,090 common shares.
COWEN CAUTIOUS ON CANADA CANNABIS: On Monday, Cowen analyst Vivien Azer downgraded Aurora Cannabis (ACB), Sundial Growers (SNDL), and Tilray (TLRY) to Market Perform from Outperform. The analyst has grown increasingly cautious on the outlook for cannabis in Canada and prefers U.S. cannabis names to its Canadian peers. Headwinds plaguing the industry include concerns on pricing, stores and inventory and they have note faded as anticipated.
ANALYSTS SOUND ON AURORA: Cantor Fitzgerald analyst Pablo Zuanic said on Monday he remains "comfortable" recommending shares of Aurora Cannabis. The analyst thinks the Canadian licensed producer group will re-rate in the year ahead and that headline concerns about oversupply should be put in context. Aurora's gross sales in Canada are second only to those of Canopy Growth (CGC) over the last five reported quarters and that scale advantage will be relevant with the trade becoming more discerning, Zuanic said. Further, he believes realized net pricing should become a "differentiating factor when determining valuations in the group." Zuanic kept an Overweight rating on shares of Aurora Cannabis with a C$3.80 price target. On Tuesday, Needham analyst Matt McGinley initiated coverage of Aurora Cannabis with a Hold rating and $1.50 price target. The analyst noted that the investment by Canada's licensed cannabis producers has "far exceeded market development", with FY20 having to endure a period of infrastructure "rationalization". McGinley added that Aurora is "deeply unprofitable", and like its peers will have to complete the task of drastic operating structure reduction while still growing its revenue. The analyst still expects the company to reach positive EBITDA by Q1 of FY21, though any shortfalls would likely place it into "liquidity risk". Additionally on Wednesday, Bryan Garnier analyst Nikolaas Faes downgraded Aurora Cannabis to Sell from Neutral with a C$1.10 price target.
CRESCO LABS, GREEN THUMB INITIATED WITH BUY: Ladenburg Thalmann analyst Glenn Mattson initiated coverage of Cresco Labs (CRLBF) on Friday with a Buy rating and $8 price target. The company has multiple high population states that are medical only but could see a transition to adult recreational marijuana in 2020 and 2021, such as New York, Pennsylvania, Arizona and Ohio, Mattson said. He added Cresco is a market leader in two tier one states, Illinois and Pennsylvania. Illinois just transitioned to an adult recreational and Mattson expects the market to grow from $250M in 2019 to over $2B over the next few years. The analyst also initiated coverage of Green Thumb Industries (GTBIF) with a Buy rating and $13 price target. The company has built out an "impressive" footprint through internal development winning licenses in key states such as Pennsylvania, New Jersey and Illinois, Mattson said, The prospects for broader cannabis legalization are strong, giving Green Thumb a "compelling opportunity when that change occurs," said the analyst.
OTHER CANNABIS STOCKS: Other publicly-traded companies in the space include Aleafia (ALEAF), Akerna (KERN), Aphria (APHA), Biome Grow (BIOIF), CannTrust (CTST), Canopy Rivers (CNPOF), Cronos Group (CRON), CV Sciences (CVSI), DionyMed Brands (DYMEF), Elixinol Global (ELLXF), General Cannabis (CANN), Greenlane (GNLN), Harborside (HSDEF), Hemp Inc. (HEMP), Hexo (HEXO), India Globalization Capital (IGC), Indiva (NDVAF), Innovative Industrial Properties (IIPR), ICC International Cannabis (WLDCF), Khiron Life Sciences (KHRNF), Liberty Health Sciences (LHSIF), MediPharm Labs (MEDIF), MedMen (MMNFF), MJardin (MJARF), Organigram (OGI), Origin House (ORHOF), Planet 13 Holdings (PLNHF), Real Brands (RLBD), Sproutly (SRUTF), Sunniva (SNNVF), Supreme Cannabis (SPRWF), Tetra Bio-Pharma (TBPMF), Trulieve (TCNNF), Valens (VLNCF),Vireo Health (VREOF), Wayland Group (MRRCF), WeedMD (WDDMF), Westleaf (WSLFF), Wildflower Brands (WLDFF) and Zynerba (ZYNE).
