Mackie Research analyst Nikhil Thadani says he has increased conviction in his positive forecast for cannabis analytics and data-as-a-service company Lift & Co (Lift & Co Stock Quote, Chart News TSXV:LIFT), which he thinks could hit $20 million in revenue by 2021.
In an update to clients on Monday, Thadani maintained his “Speculative Buy” rating and $0.80 per share price target for LIFT, which represented a 300.0 per cent projected return at the time of publication.
Last week, Toronto-based Lift & Co announced the launch of its Cohesion platform which aims to be an all-in-one source for information on cannabis consumers.
“Lift & Co. has spent five years in the Canadian market creating a platform that builds consumer trust while gathering rich consumer data that can empower marketers with unique insights to scale a brand,” said CEO Matei Olaru, in a press release on September 10.
“With Cohesion, we are combining the collective reach of our various platforms and introducing a completely new approach to cannabis consumer insights. Lift & Co.’s unique platform strategy to data collection pays off today, culminating into a single source of truth for consumer insights at a time when all brands are struggling to form.”
“Applying a 4x forward sales multiple to LIFT’s potential C2021 revenue, which could approach ~$20 million overlaid on the company’s current fully diluted share count, with corresponding cash from options and warrants and accounting for a year of cash burn implies a stock price just under $0.85…”
The company also announced last week a non-brokered private placement of 10.6 per cent senior secured convertible debentures, due on September 10, 2020, for an aggregate principal of $3.5 million and 2.7 million common share purchase warrants. $2 million of the principal amount will go towards repaying existing indebtedness, with the rest going to general corporate purposes. The private placement’s subscribers were affiliates of New York-based private equity firm Gotham Green Partners.
Thadani, who attended the unveiling of the Cohesion marketing dashboard last week, says the two moves represent positive steps for the company. He explains his view on LIFT as follows.
“Stocks in the data provider, loyalty and reviews space tend to trade at an average ~3-4x forward sales, with projected revenue growth around the 10 per cent y/y in C2020. Applying a 4x forward sales multiple to LIFT’s potential C2021 revenue, which could approach ~$20 million overlaid on the company’s current fully diluted share count, with corresponding cash from options and warrants and accounting for a year of cash burn implies a stock price just under $0.85. LIFT’s target financial model could begin to generate positive EBITDA in C2021 and eventually scale to well over 20 per cent EBITDA margin on scaled revenues of ~$40 million in about three years,” Thadani writes.
The analyst is using a discounted cash flow model with a 20-per-cent discount rate and about one per cent terminal growth rate, implying a stock price of about $0.85, with his target slightly below the suggested $0.85 per share.
Founded in 2014, Lift & Co joined the TSX Venture Exchange in September of 2018. Currently trading at $0.20 per share as of midday Monday, LIFT is now down 24.5 per cent year-to-date and down 67 per cent since its debut.