M Partners analyst Mason Brown thinks the street is underestimating how much revenue Canopy Growth Corp. (TSX:WEED) will post in its upcoming third quarter report.
On February 14, Canopy will post its Q3, 2017 results. Brown believes Canopy will post adjusted EBITDA of negative $1.2-million, adjusted gross profit of $7.4-million, and revenue of $11.9-million. The street consensus has Canopy posting EBITDA of negative $1.2-million, adjusted gross profit of $6.8-million, and revenue of $10.8-million.
Brown says he believes the comparatively lower patient consumption number of 0.62 grams per day Canopy posted in the second quarter was likely an outlier. He is modeling 0.65 grams per day for this quarter, but notes consumption has been as high as 0.79 grams per day.
“We are forecasting strong growth in revenue and grams sold driven by continued patient uptake and an uptick in patient consumption rates (grams per day) from last quarter,” he says. We’re looking for clarity on this outlier: another lower gpd point could stem from a combination of lack of inventory, higher churn in active patients, and onboarding lower consuming patients, while a bounce may suggest a one-off.”
In a research update to clients today, Brown maintained his “Buy’ rating and one-year price target of $14.40 on Canopy Growth Corp., implying a return of 21 per cent at the time of publication.
Brown thinks Canopy will post Adjusted EBITDA of negative $3.9-million on revenue of $47.4-million in fiscal 2017. He expects these numbers will improve to positive EBITDA of $14.6-million on a topline of $141.8-million the following year.
Brown says he will be looking for update on Canopy’s recently closed acquisition of Mettrum Health, including details on potential cost synergies and on Mettrum’s Health Canada recall and inspection.