Cantor Fitzgerald Drops Coverage On These 3 Marijuana Stocks

Cantor Fitzgerald’s Pablo Zaunic discontinued research coverage of Aleafia Health ALEAF, Flora Growth FLGC and Auxly Cannabis CBWTF. 

The Thesis

The analyst cited his reason for dropping coverage on these three stocks: “reallocation of analyst resources,” in his Friday analyst note, adding that Cantor’s previous “investment theses, price targets, and estimates should no longer be relied upon.”

The most recent investment thesis on these three cannabis stocks includes the following:

Aleafia

Zuanic calculated a spot enterprise value of $80 million for the second quarter of 2023 (market cap of $34 million on 405.5 million shares). The analyst held a price target on the stock of CA$0.08 ($0.059) per share.

The investment risks include slow growth of the Canadian cannabis market, rising prices, the U.S. market not opening for Canadian licensed producers, etc. “The company is somewhat of a start-up phase with branded products, so there is a risk of growing pains across the portfolio, Zuanic said, adding that “the company may need to raise further capital given growth plans and current negative cash flow generation; the heavy debt load and ongoing cash burn adds to the investment risks, and specifically further shareholder dilution risk.”

Flora Growth

The analyst previously estimated Flora’s enterprise value to be $63 million and set a price target of CA$0.85 per share.

“Sector-wise, continued delays with Colombia regulations may impact the company’s ability to export flower, extracts, and ingestibles from Colombia,” the analyst said adding that other concerns include potential shareholder dilution from JustCBD deal and cash burn pace.

Auxly

Enterprise value for Auxly according to recent Zaunic notes was around $214 million. The analyst set the price target on the stock of CA$0.03

“The high debt levels and continued cash burn are the main investment risks for equity holders,” Zuanic previously wrote. “The company had a head start in 2.0, but more licensed producers are now focusing on 2.0, so, competition has stiffened, and plentiful distillate inventories have led to hefty price compression in vape, the company’s main category.”

Price Actions

At the time of writing Monday morning, Flora Growth shares were trading 3.19% higher at $0.42 per share, Auxly shares were up 3.06% at $0.02 per share and Aleafia stock was trading flat at $0.06 per share. 

Photo: Courtesy of Joel Muniz on Unsplash