Cantor Fitzgerald's analyst Pablo Zuanic initiated coverage on two cannabis companies on Monday: Flora Growth Corp. FLGC and Clever Leaves Holdings Inc CLVR.
Flora Growth
The analyst initiated coverage of Flora's stock with a Neutral rating and a 12-month price target of $0.85.
From low-cost cultivation and extraction facilities in Colombia and expansion into consumer goods to seeking to develop distribution partnerships overseas, Flora Growth's "desire to build/acquire brands have resulted in the strategic pivot," the analyst said.
Currently, the stock is trading at about 1x sales. However, with projections of break-even EBITDA by the end of this year, as well as an announced ramp-up in the company's Colombian exports and positive changes in the country's regulatory landscape, the sentiment on the company's stock could improve, resulting in a potential increase in its value, Zuanic said.
Interestingly, Flora's chairman and CEO, Luis Merchan, recently met with Colombian Senator Gustavo Bolivar prior to the introduction of a new bill to legalize recreational cannabis in Colombia in Congress.
"For now, in the depressed valuation landscape of cannabis stocks, we are more comfortable with the risk/reward of other international growth stories in the space," the analyst said, adding that he will "keep a close eye on the company's development."
Clever Leaves
Meanwhile, Zuanic also initiated coverage of Clever Leaves with an Overweight rating and a 12-month price target of $4.50.
Clever Leaves is a producer of pharmaceutical and consumer cannabis brands. It has the potential to be among the world's top five cannabinoid exporters by the end of next year, the analyst said.
"In relative terms, the stock offers better "pure-play" exposure to growth in overseas medical cannabis markets," he added.
Currently, the company operates and has investments in Canada, Colombia, Germany, Portugal, and the United States.
"Based on private transactions in Europe (~10x EV/Sales), we believe CLVR shares are attractive, with the company's cannabinoid piece valued at 1.4x our CY23 estimates(taking the nutraceuticals piece at acquisition value)," Zuanic noted.
The company is building brand awareness while deepening its various distribution partnerships in Germany, a market that could be a key growth driver in the future, Zuanic continued.
With five distribution partnerships in Germany and additional deals in Israel, Australia, and Brazil, the company is positioned for significant growth by the end of next year.
"We model CLVR cannabinoid sales of $27Mn by CY23E, up 9x from the $3Mn garnered in CY21," the analyst said.
FLGC Price Action
Flora Growth’s shares traded 1.59% higher at $0.647 per share at the time of writing on Monday morning.
CLVR Price Action
Clever Leaves’ shares traded 4.08% higher at $0.9575 per share at the time of writing on Monday morning.
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