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Cannabis stores have been doing brisk business in these early days of the COVID-19-inspired lockdown, but M Partners analyst Paul Piotrowski said it’s too early too tell whether the bump is short-lived or an indication of a longer trend.
In an update to clients on Thursday, Piotrowski stayed bullish on cannabis CPG company SLANG Worldwide
(SLANG Worldwide Stock Quote, Chart, News CSE:SLNG), saying SLANG will soon be bulking up in the key states of Colorado and California.
As Piotrowski reported, adult-use sales in California, Washington and Colorado have been much stronger this March compared to a year earlier, with California sales up 159 per cent, Washington sales up 100 per cent and Colorado sales up 46 per cent.
The same has been true north of the border where the Ontario Cannabis Store showed last weekend sales up 80 per cent on Saturday, March 14, versus a typical Saturday and sales up 100 per cent on Sunday, March 15, versus a typical Sunday.
But the conclusions to be drawn for the pot industry from the new data are slight at this point, Piotrowski said.
“We are not inferring too much from the limited data that we have on the coronavirus sales spike. Future sales figures will determine if this is a short lived bump in anticipation of forced shut downs of retailers or a real increase in demand. Nonetheless sales have been strong all month vs. March 2019 demonstrating continued growth in mature US markets,” Piotrowski said.
“The growth in California and Colorado is particularly encouraging for SLANG which generates the majority of its revenue in the two states. SLANG is also set to deepen its operations in both states with the pending exercise and integration of its ACG and NSH options,” he said.
Headquartered in Toronto, SLANG currently markets its cannabis brands in the United States and is expanding operations through M&A activity. The company announced earlier this month an agreement to acquire Cultivate Brands, a privately-owned portfolio of brands and intellectual property along with extraction equipment and other machinery, through an all-stock transaction of a non-material amount.
SLANG said acquisition will further strengthen the company’s position in Oregon, a core market for growth for SLANG in 2020.
“The acquisition of Cultivate will provide a unique opportunity to generate value in several ways including new production assets, supply chain efficiencies and potential new products. This acquisition is consistent with our disciplined growth strategy and our focus on capital efficiency,” wrote SLANG CEO Peter Miller in a press release.
SLANG made its first foray into Ohio earlier this year with a licensing agreement with Standard Wellness Company for the latter to have exclusive license to produce and distribute SLANG products in Ohio, starting with its category-leading O.penVAPE, Pressies, Bakked and District Edibles brands. Earlier this month, SLANG announced a similar licensing agreement in the state of Maine with Wellness Connection.
With his new update, Piotrowski reaffirmed his “Buy” rating and $1.70 target price, which at the time of publication represented a projected 12-month return of 900 per cent.