The stock’s performance over 2019 doesn’t tell the whole story on Lift & Company (Lift & Company Stock Quote, Chart, News TSXV:LIFT), according to Mackie Research analyst Nikhil Thadani, who in an update to clients on Monday says that LIFT’s current valuation makes for an attractive entry point.
Toronto-based Lift provides analytics and marketing for the cannabis industry and handles events and conferences, as well. The stock has been on a prolonged slump with the rest of the cannabis space this year, but Thadani says that investors should look past 2019 to see LIFT’s potential.
“LIFT is down ~70 per cent year-to-date. Current negative investor sentiment towards Cannabis related stocks and tax loss selling is unlikely to help valuation in the near term. That said, we believe Lift has created a valuable niche for itself in the Cannabis sector, which is well regarded by Licensed Producers, retailers, and end consumers as evidenced at the recent Canadian Cannabis Awards event in Toronto, which we attended,” says Thadani.
The analyst argues that Lift’s events business alone is worth about $0.20 per share, currently double LIFT’s share price. Thadani points out that stocks in the events and expo business typically trade at about 3-4x trailing sales, and, applying a 4x trailing sales multiple to LIFT’s events revenue of about $6 million overlaid on the current fully diluted share count (without corresponding cash from exercises), he comes up with a stock price just over $0.20.
Last Friday, Lift announced its financial results for second quarter ended September 30, 2019, showing total revenues up 40 per cent to $332,000 and Data Insights revenue up 141 per cent to $213,000.
The company launched its data-as-a-service platform, Cohesion, over the quarter while also seeing growth in its CannSell platform.
“With an emerging data insights product, we are proud to announce fiscal 2020 is off to a strong start with year over year growth, increased operational efficiencies, and the launch of our flagship data-as-a-service platform, Cohesion,” said Matei Olaru, CEO, in a press release. “As a leader in providing information across the cannabis value chain, Cohesion and specifically our strategic relationship with Nielsen signal our capabilities to modernize consumer insights in the cannabis industry. Cohesion Segmentation – powered by Nielsen is a first-of-its-kind tool that combines transactional and behavioural
consumer data into prescriptive consumer insights.”
Thadani says that Lift had about $800,000 in cash and $3.2 million in debt at the end of its Q2 but thinks that the company’s cash balance has improved somewhat since then.
The analyst says that while he is not publishing financial estimates at this point, he expects to do so in a few quarters after he gets more visibility on the company’s non-events-based build-out.
“We continue to believe, all else equal, 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 revenue potential of ~$40 million in ~three years,” says Thadani.
With the update, the analyst is maintaining his “Speculative Buy” rating but dropping his target price from $0.80 to $0.30 per share citing near term revenue projections. The target represented a projected return of 200 per cent at the time of publication.