Cantor Fitzgerald Says Columbia Care Could Be Attractive To Canadian Companies, Lowers Price Target Ahead Of Company Earnings

Year-to-date, Columbia Care Inc.'s CCHW (OTCQX: CCHWF) shares lost 26.12%. The multi-state operator recently had several acquisition moves including the closing of $240 million worth purchase of privately-held cannabis company Green Leaf Medical, LLC in June.

Soon after, the New York-based company confirmed the deal to buy Medicine Man Denver for $42 million in stock and cash. The deal is projected to close during the fourth quarter of the year.

The Analyst

Cantor Fitzgerald’s Pablo Zuanic reaffirmed a ‘Neutral’ rating on Columbia stock, lowering the price target to $5.30 from $6.75. 

The Thesis 

Zuanic lowered the rating on Columbia Care's stock based on sectoral derating, updating the company's model upon closing the Green Leaf purchase and the recently announced acquisition of Medicine Man.

“We expect an in-line quarter when the company reports second quarter results on 8/12, and full-year guidance has been reaffirmed,” Zuanic explained. “We believe the stock’s current 7% discount to the peer EBITDA calendar year 2022 average is fair given the company’s lower margins, footprint, and lack of depth in some regions.”

According to the analyst, the company’s management should be ok with Bloomberg’s consensus of combined revenue reaching $109.4 million, which with the Green Leaf acquisition suggests around 11% growth from the first quarter base of $92.5 million.

Green Leaf should add around $7 million for 20 days to its figures account and will improve margins, having EBITDA margins higher than 30% in 1Q, compared to Columbia Care’s 10.5%, Zuanic highlighted.

The analyst further confirmed that the company is positioned well in states like New Jersey, New York and Virginia where adult-use programs are in a “developing” phase. He added

that Columbia's footprint could be interesting to Canadian companies, which are looking for option-type deals in case of U.S. federal legalization. 

“We remain Neutral, but will keep a close eye on the company’s progress,” Zuanic concluded.

The Price Action 

Columbia Care’s shares were trading down 1.88% at $4.71 per share at the time of writing Wednesday midday.

Photo: Courtesy of davide ragusa on Unsplash