Rubicon has tons of upside, says Haywood

The outlook remains positive on Canadian cannabis producer Rubicon Organics (Rubicon Organics Stock Quote, Charts, News, Analysts, Financials TSXV:ROMJ) and the company is on track to establishing itself in the premium cannabis market segment. That’s the scoop from Haywood Capital Markets analyst Neal Gilmer, who reviewed the latest quarterly results from Rubicon in a Monday report to clients.

Vancouver-based Rubicon Organics released its fourth quarter and full-year 2022 financials on Monday, showing net revenue up 61 per cent year-over-year to $11.0 million and adjusted EBITDA of $1.3 million compared to negative $0.6 million a year earlier.

“Rubicon Organics has achieved significant financial milestones in a fiercely competitive environment, delivering Adjusted EBITDA profitability and positive cash flow from operating activities for the 2022 year,” said Interim CEO and CFO Margaret Brodie in a press release.

With a market capitalization currently at $34 million, ROMJ’s share price is down substantially over the past two years, much like the rest of the cannabis sector. The stock reached $4.00 in October 2020 but has been trading in the $0.50-$1.00 range over the past half year. 

Gilmer sees a better road ahead for investors and reiterated in his report a “Buy” recommendation on Rubicon while lowering his target price from $2.50 to $2.25 per share, representing at press time a projected one-year return of 269 per cent.

“Rubicon continues to have strong market share within the premium segment across its markets,” Gilmer wrote. “The company remains prudent in operating expenses with a solid balance sheet. We believe the company is positioned to establish itself in a strong niche segment of the market.”

On the Q4 2022 results, Gilmer said they were generally in-line with estimates, with the $11.0 million topline equalling Gilmer’s $11.0 million estimate and adjusted EBITDA at $1.3 million comparing to the analyst’s call at $1.8 million. Gilmer noted Rubicon’s positive quarterly cash flow from operations at $2.8 million and free cash flow at positive $1.9 million. Rubicon finished the quarter with $8.3 million in cash and $10.2 million in total debt, of which $0.8 million is due in the next 12 months.

Gilmer said Rubicon increased its Canada-wide adult-use market share in 2022 to 2.4 per cent compared to 1.8 per cent in 2021. The analyst credited much of the success to the company’s expansion of its 1964 Supply Co brand and demand for its Comatose strain.

Up ahead, Gilmer has forecasted $48.1 million in 2023 revenue compared to $35.5 million achieved in 2022 and $8.0 million in 2023 EBITDA compared to $1.9 million in 2022.