The strongest guidance he has seen from management has Beacon Securities analyst Russell Stanley raising his price target on Harvest Health and Recreation (Harvest Health and Recreation Stock Quote, Chart CSE:HARV).
On Tuesday, HARV reported its Q4 and fiscal 2018 results. In the fourth quarter, the company posted Adjusted EBITDA of $2.6-million on revenue of $16.9-million, a topline that was up 135 per cent over the same period in 2017.
“Two thousand eighteen continued to set records for Harvest’s growth and momentum across the United States,” CEO Steve White said. “Three key initiatives dictated our decisions throughout the year and will continue to be our focus in 2019: aggressively expanding our retail and wholesale footprint across the U.S., building, acquiring and expanding our suite of brands across our footprint, and continuing to operate in a financially disciplined way, while also fueling the revenue growth of the company.”
Stanley says these results were stronger than he expected. But he says more importantly, the pro forma guidance provided by management on Tuesday’s conference call was stronger than ever before.
“Management provided pro forma 2020E revenue guidance of $900M to $1B, with EBITDA margins of 30% to 35% (implying EBITDA guidance of $270M to $350M, see pp. 3-4 for more detail),” the analyst notes. “This represents the strongest formal 2020E revenue/EBITDA guidance we have seen from any multistate operator. We have increased our 2020E EBITDA attributable EBITDA estimate from $171M to $293M, based primarily on the inclusion of the previously announced acquisitions of Verano and CannaPharmacy. Our valuation approach is unchanged, and our 30x EV/C2020E EBITDA multiple represents an 21% discount to the average multiple for companies with a C$1B+ market capitalization.”
In a research update to clients today, Stanley maintained his “Buy” rating on Harvest Health, but raised his one-year price target on the stock from $23.00 to $26.00, implying a return of 92 per cent at the time of publication.
Stanley thinks HARV will post Attrib. EBITDA of $40-million on revenue of $238-million in fiscal 2019. He expects those numbers will improve to EBITDA of $293-million on a topline of $956-million the following year.
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