Canopy Rivers has a huge upside, says PI Financial

Devin Schilling of PI Financial is bullish on cannabis investment platform Canopy Rivers (Canopy Rivers Stock Quote, Chart TSXV:RIV), who just jumped into the health and beauty segment of the cannabis market.

In a Tuesday update to clients, Schilling reiterated his “Buy” rating and $9.00 target price for RIV, representing a projected return of 145.9 per cent at the time of publication.

Canopy Rivers, an investment arm of Canopy Growth, on Tuesday announced a $2.5-million investment in High Beauty, creators of the cannabis beauty brand ‘high,’ representing an 18.4-per-cent ownership interest.

“We have been actively pursuing opportunities in the health and beauty industry, guided by a growing consumer trend of brand new, innovative and functional beauty products. Enter high,” said Narbe Alexandrian, President of Canopy Rivers, in a press release. “Led by Melissa Jochim, a repeat entrepreneur, preeminent formulator and brand developer coming from the natural, organic segment of the beauty industry, high has already captured mindshare and awareness of consumers – it has all the makings to continue to be a prominent brand in the cannabis-infused beauty market.”

Schilling notes that High Beauty’s products are made from cannabis sativa seed extracts and are thus free of THC and CBD. The company has a distribution deal with Sephora, which operates 2,300 stores across 33 countries worldwide, showing the potential longer-term distribution opportunity in the deal, says Schilling, who rates the event as a positive for RIV.

“This investment represents Canopy Rivers first investment into the Health and Beauty segment which we expect will be a high-growth and high-margin segment of the overall cannabis industry,” says Schilling.

“The cannabis-infused topical market is currently niche, accounting for less than 1 per cent of cannabis sales in legal US states. Despite the current small market share, this category is rapidly growing and we expect this trend to continue as CBD becomes more mainstream,” he says.

The analyst’s Total NAV estimate has moved from $923 million to $933 million and his NAVPS estimate has gone from $4.24 to $4.29 per share. Schilling’s $9.00 target represents a P/NAV of 2.1x based on his NAVPS estimate of $4.29.