Following the company’s second quarter results, Beacon Securities analyst Russell Stanley has raised his price target on Harvest Health and Recreation (Harvest Health and Recreation Stock Quote, Chart, News CSE:HARV).
In a research update to clients Wednesday, Stanley maintained his “Buy” rating but raised his one-year price target on HARV from $3.00 to $3.50, implying a return of 89 per cent at the time of publication.
The analyst explained the reasoning behind the action.
“We are increasing our 12-month target price from C$3/sh to C$3.50/sh, following upward revisions to our revenue/EBITDA forecast,” he said. “Last night after the close, HARV reported revenue/adjusted EBITDA of $56M/$4M vs. consensus of $49M/($2M) and our estimates of $46M/($6M). The company has successfully driven strong margin improvement, allowing it to become EBITDA positive two quarters ahead of our forecast. We have increased our F2020 revenue/EBITDA forecast from $200M/($6M) to $218M/$11M, and our F2021 revenue/EBITDA forecast from $384M/$77M to $389M/$88M to reflect the elevated F2020 revenue guidance as well as continued SG&A improvement. The company continues to focus its growth efforts on four key markets: Arizona, Pennsylvania, Florida, and Maryland. After lagging its peers in terms of share price performance, HARV was the strongest performer in our tracking group last week (up 22%). As shown on page 6, the technical picture has improved significantly, and we believe the stock has strong upside potential on both a fundamental and technical basis.”
Stanley thinks Harvest Health will post Attrib. EBITDA of $9.0-million on revenue of $218-million in fiscal 2020. He expects those numbers will improve to EBITDA of $88-million on a topline of $389-million the following year.
The analyst argued that HARV is cheap compared to its peers.
“HARV trades at approximately 9.5x our increased F2021 EBITDA forecast. This represents a 20% discount to the 11.9x average amongst US operators, and a 27% discount to the 13.0x average for the broad peer group. Potential catalysts include further progress towards
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