It’s not enough to move the dial on his already bullish target price, but Echelon Wealth Partners analyst Russell Stanley says he likes the deal between Shoppers Drug Mart and Emblem Corp. (Emblem Corp. Stock Quote, Chart, News: TSXV:EMC).
This morning, Emblem Corp. announced that, subject to the approval of Health Canada, it had signed a deal to supply medical cannabis to Shoppers Drug Mart.
“From the very beginning we’ve been very focused on being a leader in the medical cannabis space, not only from the production side, but also when it comes to physician and patient education,” CEO Nick Dean said. “Today’s deal with Shoppers Drug Mart helps to solidify that and positions us well to be a world leader of cannabis for medical purposes.”
Stanley says this is a good deal for Emblem.
“While we are leaving our estimates unchanged, we view the announcement positively as it is a strong validation of EMC’s product offering,” the analyst says. “The stock closed up 10% on the day (albeit on slightly below-average volume), outperforming the 2% gain by the Horizons Marijuana Life Sciences ETF (HMMJ-TSX, NR). Potential catalysts include improved financial results, additional product development milestones, and expansion updates.”
In a research update to clients today, Stanley maintained his “Speculative Buy” rating and one-year price target of $2.50 on Emblem Corp., implying a return of 74 per cent at the time of publication.
Stanley thinks Emblem will generate Adjusted EBITDA of negative $6.0-million on revenue of $2.7-million in fiscal 2017. He expects those numbers will improve to EBITDA of negative $5.4-million on a topline of $9.4-million the following year.