Canopy Rivers is an undervalued stock, PI Financial says

The deals are coming fast and furious for cannabis sector investment company Canopy Rivers (Canopy Rivers Stock Quote, Chart TSXV:RIV), which on Tuesday announced a $1.5-million investment in 10663522 Canada Inc, or “Herbert,” a brand platform which aims to create lifestyle-based THC-infused products for distribution in Canada.

PI Financial analyst Devin Schilling is taking the news as a positive for RIV, saying it will give Canopy Rivers early exposure to Canada’s forthcoming adult-use cannabis beverage and edible product segment.

Just days after announcing a $9-million debt financing investment in Greenhouse Juice Company, a beverage maker looking to expand nationally with CBD-infused wellness products, the new announcement sees Canopy Rivers — the investment arm of industry leader Canopy Growth Corp — putting money in Herbert, which reportedly has ties to Greenhouse Juice.

“In the US, cannabis-infused beverages have emerged as a high-growth segment within the ingestibles category, and include a variety of products in both THC- and CBD-dominant formats,” says Narbe Alexandrian, President of Canopy Rivers, in a press release. “In Canada, we expect similar growth beyond dried flower and oils into food and beverage. Canopy Rivers believes that Herbert, equipped with existing R&D, marketing and manufacturing expertise, has the ability to enter this market quickly and achieve success in creating widely appealing THC-infused beverages and edibles under this new standalone brand.”

Schilling says that in mature markets in the US, edibles make up between ten and 15 per cent of total sales, and he predicts a similar market in Canada, with the implementation date likely to come before October of this year, says Schilling.

“Hebert intends to leverage Greenhouse’s existing purpose-built, food-grade and GMP-compliant production and processing facility through an arrangement with Greenhouse,” says Schilling in a client update on Tuesday. “We believe this will be a cost-effective way of getting product to market, once regulations permit.”

Schilling has maintained his “Buy” recommendation with a “Speculative” risk rating for RIV and his $9.00 target price, which represents a 111.8 per cent return at the time of publication.

“We believe Canopy Rivers represents best-in-class exposure to the emerging global cannabis sector,” says Schilling.