Industrial Alliance Securities analyst Nav Malik is expecting big things from US cannabis company Harvest Health & Recreation (Harvest Health & Recreation Stock Quote, Chart CSE:HARV).
In a coverage launch on Monday, Malik has rated HARV a “Buy” with a C$19.00 target price, representing a 12-month projected return of 139.0 per cent at the time of publication.
Arizona-based multi-state operator Harvest Health is one of the largest MSOs in the US and on a proforma basis holds 142 retail licenses and 77 cultivation/processing licenses, with licenses and operations across 17 states. Along with Arizona, where Harvest has the largest market share, Malik sees other key states for the company being Florida, Pennsylvania, California, Nevada, Michigan, Maryland, Ohio, New Jersey and Illinois.
Malik says Harvest has developed a track record of growth through new license wins and acquisitions and he expects Harvest will have 94 retail locations open by the end of 2019 and 140 by the end of 2020. That’s along with production capacity of 130,000 pounds of cannabis (approx. 59,000 kg) and four million product units per year by the end of 2020.
“Harvest is one of the largest MSOs in the US and holds licenses in a number of attractive markets. We are forecasting strong growth as the Company operationalizes existing licenses, establishing one of the largest vertically integrated footprints of any MSO. Upcoming sales of CBD products provide additional growth potential,” says Malik.
The analyst says HARV is currently trading at a discount to its peer group, at 2.6x EV/Sales and 8.2x EV/EBITDA compared to the peer average of 3.7x and 12.0x, respectively. Malik thinks HARV will generate fiscal 2019 revenue and EBITDA of $325.7 million and $68.2 million, respectively, and fiscal 2020 revenue and EBITDA of $913.8 million and $286.3 million, respectively. (All figures in US dollars unless noted otherwise.)
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