Bedrocan Cannabis gets price target raise at M Partners

Another quarter of increased revenue has M Partners analyst Daniel Pearlstein feeling bullish about Bedrocan Cannabis (TSXV:BED)

Last Thursday, Bedrocan reported its fourth quarter and fiscal 2015 results. The company lost $5.74-million on revenue of $1,574,174 over the 13-month period ended Jan. 31, 2015.

“Our results reflect the continued growth of our revenues and execution of key initiatives to drive growth,” said CEO Marc Wayne. “Subsequent to year-end, we were able to initiate our domestic production activities at our new state-of-the-art production facility, marking the important transition to the second phase our growth strategy. With the successful import and transplant of live genetic clones from Bedrocan BV, we are on track to harvest our first domestic crops for shipment to patients in Canada in our quarter ending July 31, 2015. We are well positioned to gain additional patients and, moving forward, become the producer of choice for pharmaceutical-grade medicinal cannabis in Canada.”

Pearlstein says he expects one more quarter of importing before Bedrocan starts to report domestic sales. He believes the company’s balance sheet is strong enough to get it there.

“With facility construction completed earlier this year, cash & short term investments of $4.1 million should be sufficient to fund the company through the production transition. Further cash became available subsequent to quarter-end as 1.2 million warrants were exercised for proceeds of $742,500; at quarter-end Bedrocan had 7.3 million warrants exercisable at $0.60 until February 20, 2016, as well as 6.75 million exercisable at $1.20 until November 15, 2015,” said Pearlstein.

In a research update to clients today, Pearlstein maintained his “Buy” rating on Bedrocan Cannabis, but raised his one year target price on the stock from $1.10 to $1.25, implying a return of 81% at the time of publication. The analyst says he arrived at the new target price by rolling forward his valuation period by a quarter.