Canopy Rivers gets lower price target at GMP, keeps “Buy” rating

Following the company’s second quarter results, GMP Securities analyst Martin Landry has lowered his one-year price target on Canopy Rivers (Canopy Rivers Stock Quote, Chart TSXV:RIV), though the analyst still thinks there is plenty of upside in the stock.

On Monday, Canopy Rivers reported its Q2, 2018 results. The company posted operating income of $23.3-million up from $800,000 in the same period last year.

“The second quarter was highlighted by several key milestones for Canopy Rivers, including the closing of our private placement financing, our go public transaction and listing on the TSX Venture Exchange, our first European investment, and several new developments from our existing portfolio companies,” CEO Bruce Linton said. “With increasingly progressive global sentiment towards cannabis, a rapidly evolving regulatory landscape, and the increased volatility we have observed in the capital markets since legalization, the conditions are there for significant potential gains. With our strong balance sheet, we believe Canopy Rivers is poised to make highly accretive investments in this robust sector.”

Landry says these results were “largely immaterial” as the company’s valuation is more impacted by its Net Asset Value than anything else at the moment. He currently values NAV at $3.25, down from $3.77, due to the decrease of certain public assets of late.

In a research update to clients today, Landry maintained his “Buy” rating on Canopy Rivers, but lowered his one-year price target on the stock from $8.00 to $7.25, implying a return of 91.3 per cent at the time of publication.

The analyst says there are still many catalysts that could prompt a re-rating higher, however.

“We expect that PharmHouse will obtain its cultivation licence sometime in H1/CY19, an event that would enable Canopy Rivers’ largest investment to begin production,” Landry says. “Additionally, the Farm Bill and the STATES Act remain on the horizon and, if passed, could enable Rivers to enter the US cannabis market through the PharmHouse JV partner. Lastly, Canopy Rivers has ~$134m of capital to deploy (fully diluted), a healthy war chest that we expect will be put to use in the medium term, potentially in international markets beyond the US.”

Landry thinks RIV will generate EPS of negative $0.07 on Operating Income of $25.4-million in fiscal 2019. He expects those numbers will be EPS of negative $0.16 on OI of $4.1-million the following year.