Harvest Health Reports 84% YoY Higher Revenue Of $102.5M; Cantor Fitzgerald Sets $3.85 Price Target Based On Trulieve Acquisition Price

Harvest Health & Recreation Inc. HARV HRVSF posted its second-quarter revenue of $102.5 million, up by 84% from $55.7 million in the same period of 2020. 

On Tuesday, Phoenix, Arizona-based company also disclosed a net loss of $19.2 million, which compares to a net loss of $23.0 million in the prior quarter.

Adjusted EBITDA for the second quarter amounted to $28.0 million, versus $26.9 million in the first quarter. The gross profit margin was 51.0, compared to 42.1% in the corresponding period of 2020.

The Analyst 

Cantor Fitzgerald’s analyst Pablo Zuanic kept a ‘Neutral’ rating on Harvest stock, placing the price target at $3.85. 

The Thesis 

To set up the price target on Harvest stock of $3.85, the analyst looked at the offer ratio from Trulieve Cannabis TCNNF, 0.1170 per Trulieve share, which will acquire the company in a $2.1 billion deal.

Harvest’s second-quarter revenue of $102.5 million beat FactSet's consensus of $96 million, noted Zuanic.

The company added five stores during the reporting period, with same-store sales going up 11% sequentially.

“Harvest promoted more in the second quarter as more stores began to offer recreational services in Arizona,” highlighted Zuanic, adding that the company also reaffirmed its full-year sales guidance of >$400 million. 

Under the company’s existing plans, Harvest could reach 19 stores in Arizona by 2023, and 15 in Pennsylvania.

According to the analyst, the Trulieve transaction could close on January 1, 2022, because of authorizations needed in many states. He noted that Harvest will hold a special annual meeting on August 12 to approve the acquisition.

Under the deal, Trulieve will issue 0.1170 shares, and taking Trulieve’s and Harvest’s Tuesday closing price it would equal $3.85 versus $3.76, respectively, said Zuanic, pointing out that their price target of $3.85 “is based on the current Trulieve share price and the deal conversion ratio.” 

In conclusion, the analyst highlighted several investment risks, explaining that the main one is related to the Trulieve deal and its share price. At the same time, Zuanic noted the chance of not going through with the merger is less than 1%. 

Price Action 

Harvest’s shares closed Tuesday’s market session 0.17% lower at $3.76 per share. 

Photo: Courtesy of Add Weed on Unsplash