Canaccord Genuity Turns Bullish On The Green Organic Dutchman After Sell-Off

Cannabis company The Green Organic Dutchman Holdings Ltd TGOD's shares have lost more than half their value in the last month.

The sell-off might present a good buying opportunity, as the stock has upside ahead, according to Canaccord Genuity.

The Analyst

Canaccord's Derek Dley initiated coverage of The Green Organic Dutchman Holdings Ltd's Canadian-listed stock with a Speculative Buy rating and a U.S. dollar equivalent price target of $5.40, implying upside of more than 88 percent.  

The Thesis

The Green Organic Dutchman is well-positioned to take advantage of multiple international opportunities, but also has a strong exposure to the organic Canadian marijuana market, Dley said in the initiation note.

The company is well-funded to reach an annual capacity of around 430,000 pounds, which excludes hemp, the analyst said. TGOD is estimated to have around $355 million in cash, including in-the-money warrants, he said.

Full production capacity should result in annual revenue between $1.1 billion and $1.4 billion, according to Canaccord. 

Dley expects TGOD to become free cash flow positive in 2020. The company also has a strong competitive advantage with its organic cannabis products offering, he said. 

TGOD has already made some progress internationally with the acquisition of HemPoland, which offers exposure to 14 European countries, the analyst said. 

Canaccord's price target implies a forward 2020 EBITDA multiple of 13.4x, which is lower than the average mid-tier Canadian LPs multiple of 15.9x. The discount to the EBITDA multiple is due to the early stage of the company's operations, the sell-side firm said. 

The Price Action

The Green Organic Dutchman's over-the-counter stock was up 2.8 percent at $2.93 at the time of publication Thursday. 

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