Vivo Cannabis has price target trimmed at PI Financial

Following the company’s first quarter results, PI Financial analyst Jason Zandberg has cut his price target on Vivo Cannabis (Vivo Cannabis Stock Quote, Chart TSXV:VIVO).

On Wednesday, Vivo posted its Q1, 2019 results. The company generated EBITDA of negative $2.2-million on net revenue of $5.1-million, down from the $5.8-million topline the company delivered in the same period a year prior.

“The first half of 2019 has been focused on increasing VIVO’s production capacity. With the recent doubling of capacity at both our Canna Farms and Vanluven facilities, we have been very successful in that regard,” CEO Barry Fishman said. “Our goal has always been to increase long-term shareholder value by establishing ourselves as a premium provider of cannabis products and services. We are lowering our cost per kilogram through increased production capacity, thereby realizing economies of scale.”

Zandberg notes that Vivo’s topline fell short of his expectation of $6.5-million. He explained what happened to produce the result.

“VIVO’s revenue declined compared to Q4 FY18 partly due to initial product stocking for the adult-use market by provincial distributors that benefited the Company,” the analyst explains. “Management also highlighted that $4M of the total revenue came from cannabis sales in BC. VIVO only sold 215kg of cannabis during the quarter vs. 342kg in the previous quarter, highlighting its slow roll out in the adult-use market post legalization.”

In a research update to clients today, Zandberg maintained his “Buy” rating but trimmed his price target on VIVO from $2.00 to $1.80, implying a return of 157 per cent at the time of publication.

The analyst thinks VIVO will post EBITDA of negative $14.1-million on revenue of $25.9-million in fiscal 2019. He expects those numbers will improve to EBITDA of negative $1.7-million on a topline of $54.4-million the following year.