Three best ideas for 2022 from Haywood Capital Markets

The year ahead could be more volatile for equity markets, according to investment firm Haywood Capital Markets, which just released its list of Top Picks for 2022. 

Haywood analysts see COVID disruptions, rising commodity prices and interest rate hikes as adding notes of uncertainty for investors to grapple with, but they argue the focus should therefore be on company fundamentals for isolating those names that are uniquely positioned within their respective industries.

Under the Special Situations and Technology heading, Haywood has picked out Curaleaf (Curaleaf Stock Quote, Charts, News, Analysts, Financials CSE:CURA) in the cannabis space, East Side Games (East Side Games Stock Quote, Charts, News, Analysts, Financials TSX:EAGR) in the growing gaming sector and Greenlane Renewables (Greenlane Renewables Stock Quote, Charts, News, Analysts, Financials TSX:GRN) as a cleantech favourite.

Analyst Neal Gilmer gave the nod to US cannabis multi-state operator Curaleaf, saying its largest state footprint among US companies with operations across 23 states with currently 25 cultivation sites and 117 dispensaries, its recent acquisitions in the Southwest with Tryke and Bloom Dispensaries and its strong balance sheet including a recent $475-million debt financing all work together to make CURA a best bet in the sector.

“Curaleaf continues to be a leader in the US landscape both in terms of its current breadth of operations and position for future growth,” Gilmer wrote. “The company has operations in 23 states nationwide as well as a presence in Europe following its EMMAC acquisition earlier in 2021. Given Curaleaf’s size of operations and strong balance sheet, we believe the company is well positioned to benefit from continued growth across the states in which it operates and potential optionality of federal reform.”

Gilmer has CURA rated as a “Buy” with a $20.00 target price, which at the time of publication represented a projected one-year return of 90 per cent.

Vancouver-based mobile game developer East Side Games (formerly LEAF Mobile) had a breakout 2021 with some strong M&A moves and new game releases, and Gilmer sees further good news in the year ahead, calling for revenue growth of 67 per cent and based on new marquee titles Ru Paul Drag Race Superstar (released this past October) and The Office: Somehow We Manage (scheduled for worldwide release in the very near term).

Gilmer pointed to trends which show mobile gaming to have been the only gaming segment in 2021 to outpace the huge COVID-related growth of 2020, and the analyst said mobile games currently represent 52 per cent of the overall market, building off growth of about 19 per cent and 26 per cent over the prior two years.

Gilmer also noted East Side Games’ game development platform Idelkit as an added advantage for the company in bringing titles to market expediently while minimizing costs, and he also singled out ESG’s management team as particularly strong and experienced in the mobile game development sector.

“We believe East Side Games has demonstrated its ability to enter several proprietary IP agreements while at the same time entering partnerships that leverage it Idlekit platform to further diversify its revenue base. With a proven game portfolio, new title launches, a SaaS revenue model and M&A pipeline, the company is well positioned for 2022,” Gilmer wrote.

East Side Games had a down year in its debut in 2021 but Gilmer is expecting good results for the year ahead, giving ESG a “Buy” rating and $6.50 target, which at press time represented a projected one-year return of 87 per cent.

Finally, a strong order backlog, sales pipeline and solid positioning in the growing renewable natural gas (RNG) industry are all points in favour of Greenlane Renewables, according to Haywood analyst Colin Healey. The company, which provides biogas upgrading systems to waste producers, gas utilities and project developers, saw its share price take off like a rocket over the back end of 2020 and into 2021, but a pullback across the renewables space put the stock on its heels for the rest of the year.

Healey has reaffirmed Greenlane as a Top Pick, saying the company is his preferred way to gain leverage in the accelerating global investment in RNG.

“Greenlane continues to execute on its growing sales backlog where it has announced $19.2 million in new contract wins over the past few weeks as well as the acquisition of an Italian biogas upgrading product solution provider,” Healey wrote. “Greenlane continues to rapidly grow its business and position itself as a global leader in the renewable natural gas infrastructure space.

Healey is calling for 2020 topline growth of over 30 per cent, building on last year’s 125 per cent revenue growth as the company pulls in more contract wins and sets the stock up for a number of catalysts over 2022, according to the analyst.

“We see the recent weakness in the tock as an opportunity for investors to increase exposure at bargain prices as the underlying business remains robust,” Healey wrote.

With the update, Healey reiterated his “Buy” rating and $3.75 target, which at press time translated to a projected return of 200 per cent.

Disclosure: East Side Games is an annual sponsor of Cantech Letter.