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iAnthus Capital Holdings has price target cut at PI

iAnthus Capital Holdings

iAnthus Capital HoldingsPI Financial analyst Jason Zandberg has reduced his target price for US cannabis company iAnthus Capital Holdings (iAnthus Capital Holdings Stock Quote, Chart, News CSE:IAN), saying in an earning update to clients on Thursday that while iAnthus appears well-capitalized going forward, slower sales growth has impacted his forecast.

iAnthus, which own and operates cannabis cultivation, processing and retail facilities across 11 states including 27 dispensaries, released its fiscal third quarter 2019 financials on Wednesday.

The company reported revenues of $22.3 million, up 16 per cent sequentially, with pro-forma revenue of $30.9 million. Its retail business grew by 28 per cent from the previous quarter, with its MPX brand of cannabis products taking top market share position in a number of states. According to management, iAnthus is funded to support its expansion plans.

“We expect that we have arranged the necessary financing to continue our growth with a proposed $100 million financing plan and our business now generates adequate cash for operating expenses and maintenance capex in our more established markets. Access to the expected capital from Gotham Green will be used for additional high return investments such as our continued expansion in Florida, New Jersey and New York,” said Hadley Ford, CEO, in a press release.

The company’s top and bottom lines came in under Zandberg’s estimates, which were for revenue of $26.6 million and EBITDA of negative $1.6 million in comparison to iAnthus’ $22.3 million and negative $11.5 million.

In his review of the quarter, Zandberg pointed out that iAnthus grew its sales in the eastern region, notably in Florida where it continues to expand its retail platform with four new dispensaries for a total of nine stores in the state. While in Massachusetts, IAN’s wholesale business has been negatively affected by the statewide ban on vaping products. The company’s CBD for Life products are now in over 2,300 retail locations, management has said. In the West, sales grew by one per cent sequentially to $9.1 million with no new stores opened.

But Zandberg was more upbeat about the company’s capital position, which shows a cash position at the end of the third quarter of $28 million, with the $100 million from Gotham available.

“Q3 sales were slightly lower than expected which impacted our FY19 forecast,” writes Zandberg. “Quarter over quarter sales growth in Q3 was 19 per cent and we are projecting 25 growth in Q4 as the four new Florida dispensaries.”

“We expect FY20 sales to grow 185 year-over-year to $225.7 million from our FY19 forecast. We are assuming strong growth in both regions as well as its CBD for Life products. Our FY20 sales also include the addition of its acquisition of Sierra Well which we expect to close in H1 FY20,” he writes.

Zandberg’s EBITDA forecasts are for negative $35.9 million in fiscal 2019 and for $27.8 positive $27.7 million in fiscal 2020 (previously negative $14.2 million and positive $59.4 million, respectively).

The analyst Thursday maintained his “Buy” rating but dropping his target from C$4.50 to C$4.00, which represented a projected return of 112.8 per cent at press time.

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