Investors looking for best-in-class exposure to the emerging global cannabis sector would be wise to check out the newly listed Canopy Rivers (Canopy Rivers Stock Quote, Chart TSXV:RIV), PI Financial analyst Devin Schilling says.
In a research report to clients today, Schilling initiated coverage of Canopy Rivers with a “Buy” rating and one-year price target of $10.00, implying a return of 75.4 per cent at the time of publication.
“Canopy Rivers is a strategic growth platform for the emerging global cannabis industry,” the analyst explains. Investments are structured to maintain a balance between predictable, contractual cash flows and will typically also include an equity or equity-linked interest to provide upside optionality. Investee companies are provided with more than just growth capital, they also receive support from the Canopy group of companies.
The analyst says signs of success are already emerging at the nascent firm
“Canopy Rivers is anticipated to have a strong growth profile from a pipeline of domestic and global operators seeking alternative financing solutions. Strategic support provided to the portfolio companies is expected to expedite the growth of the underlying holdings which could provide upside to the value of the Canopy Rivers portfolio. Early success is evident by the large returns generated from the TerrAscend (+1170%), James E. Wagner (+98%), and Solo Growth (+354%) investments.”
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Schilling thinks Canopy Rivers will generate Adjusted EBITDA of negative $24.0-million on operating income of negative $5.27-million in fiscal 209. He expects those numbers will improve to EBITDA of positive $6.33-million on a topline of $10.73-million the following year.
Schilling says RIV has a strong value proposition that goes far beyond Canopy’s balance sheet.
“With the backing of Canopy Growth, Canopy Rivers can offer more to potential partners than just a cheque,” he says. “Medicinal cannabis partners are able to leverage the data, relationships and understanding of Canopy Growth’s patient network – the largest patient network in the world. Ancillary cannabis service companies can tap into Canopy Growth’s production platform across Canada – the largest footprint of cannabis production in the world Craft growers are able to access retail distribution through Canopy Growth’s CraftGrow and Tweed Main Street.”