Buy Supreme Cannabis for a double, PI Financial says

Analyst Jason Zandberg of PI Financial says licensed cannabis producer The Supreme Cannabis Company (Supreme Cannabis Stock Quote, Chart TSXV:FIRE) exceeded his expectations in its latest quarterly report.

In an update to clients on Monday, Zandberg reiterated his “Buy” rating and $4.50 price target for FIRE.

Yesterday, Supreme Cannabis announced its fiscal fourth quarter 2018 financials for the three months ending June 30, 2018, with the company generating $3.5 million in revenue, which was up 71 per cent from the previous quarter and beat Zandberg’s estimate of $2.6 million. Q4 EBITDA was negative $0.3 million, up from negative $2.5 million last quarter and beating Zandberg’s negative $2.7 million estimate.

CEO Navdeep Dhaliwal says the company’s 7ACRES facility is set to become the first coast-to-coast premium rec cannabis brand in Canada.

“Over the past twelve months, Supreme Cannabis executed on its plan to deliver strong financial growth, build proprietary value around regulated cultivation at scale, establish coast to coast distribution in recreational markets and make inroads into the international medical cannabis market with a strategic investment,” says Dhaliwal.

Zandberg noted that Supreme’s premium products are “widely recognized by the industy” and that the company is one of only seven licensed producers to have supply agreements with five or more provinces.

“We continue to believe that Supreme can supply high quality dried cannabis into the recreational market place and command a higher than average price for its premium product offering,” Zandberg says.

Supreme Cannabis stock is undervalued, Zandberg says

The analyst has upped his forecast, now calling for sales of $44.4 million and $117.0 million in fiscal 2019 and 2020, respectively, (previously $43.8 million and $110.8 million). Zandberg’s EBITDA forecast for the same period is now $5.3 million and $36.0 million, respectively (previously $4.9M and $34.7M). He has also introduced a fiscal 2021 forecast, calling for sales of $193.1 million and EBITDA of $57.1 million.

Zandberg’s $4.50 target represents a projected 12-month return of 103.6 per cent at the time of publication.