Craig-Hallum Says Agrify Has 'An Attractive Business Model'

Year-to-date, Agrify Corporation (NASDAQ: AGFY) stock gained 55.65%.

The non-plant-touching cannabis company that offers vertical farming solutions recently partnered with Curaleaf Holdings, Inc. CURLF to determine the impact of the cultivation environment on the overall health of marijuana plants and harvest yields. Under the deal, the Massachusetts-based company agreed to provide the use of its Agrify Insights software platform for three years to Curaleaf's facility located in the Bay State.

The Analyst 

Craig-Hallum’s analyst Eric Des Lauriers initiated coverage on Arify’s stock, placing a ‘Buy’ rating and a $25 price target.

The Thesis 

Agrify enables the cultivation and sale of premium produce in urban “food deserts,"

noted Des Lauriers in his Friday analyst note, unlike most companies.

“While most vertical farming companies ultimately sell low-margin produce, Agrify sells hardware and collects high-margin recurring software and production fees.”

This makes the company’s business model an attractive opportunity for investors, 

providing them with high growth cannabis exposure, though without the limitations that plant-touching cannabis businesses experience, explained Des Lauriers.

“Bottom line—Agrify has built a better mousetrap for cannabis cultivators that also might just be the solution to one of the industry’s biggest long-term risks. With cannabis and software-as-a-service themes, Agrify could become an investor favorite that we think is too cheap at around $250 million evaluation.“  

According to the analyst, Agrify’s solutions provide many advantages that other vertical solutions cannot. Some of those are – 1) Double the industry averages of cannabinoid and terpene potencies; 2) Increased yields by four to six times while reducing costs per pound by 20%; 3) Possible solution to interstate commerce risk, with the company's vertical farming units being modular, they can be relocated from small to large facilities.

Des Lauriers further projects quick growth in Agrify’s installed base, estimating the number of installed vertical farming units will grow 20 times by the end of 2024.

With $25M+ in software-as-a-service and production-based recurring revenues already under contract, the analyst sees the potential for $60M+ recurring revenue in 2025.

“We think $60M+ recurring revenues in 2025 could warrant a $1B valuation, or $40 per share, assuming a software-as-a-service revenue multiple of 15x.”

 The Price Action 

Agrify’s shares were trading 4.54% lower at $18.93 per share at the time of writing Monday morning.

Photo: Courtesy of Jeff W on Unsplash