Fourth quarter 2022 results are in from Canadian cannabis name BZAM (BZAM Ltd Stock Quote, Charts, News, Analysts, Financials CSE:BZAM) and they show a company building momentum as well as gaining market share. That’s according to Clarus Securities analyst Noel Atkinson, who in a Tuesday report kept a “Speculative Buy” rating and $0.65 per share target price, good for a 12-month projected return of 100 per cent.
BZAM, which used to be known as The Green Organic Dutchman before merging with private company BZAM this past November and then taking on the BZAM name in February, released its Q4 2022 on April 28. The quarter came in with $17.2 million in revenue, up from $13.3 million and including $11.5 million from TGOD brands and a $5.7 million contribution from BZAM between November 3 and end of quarter. For the year, net revenue was up 63 per cent to $49.4 million.
“The integration has been going smoothly and with approximately $24 million in net revenue booked in the first quarter of 2023, representing quarterly growth of nearly 40 per cent, we continue to pursue our goals of positive adjusted EBITDA and free cashflow in 2023,” said CEO Matt Milich in a press release.
Looking over the results, Atkinson said the $17.2 million topline was light of his $20.2 million forecast, while an adjusted EBITDA loss of $6.0 million was both lower than the negative $5.5 million from the third quarter and a bit below the Clarus call at negative $5.4 million.
Atkinson said the delta on revenue was partly due to a slightly later close of the merger transaction. At the same time, he noted healthy organic sequential uptick in the company’s TGOD-branded products.
More good news, Atkinson said BZAM continues to hold the #6 market share in Canadian adult-use cannabis with 4.7 per cent of the market as of December 2022 and rising to 5.2 per cent by February 2023, while the overall Canadian adult-use retail sector totalled a $4.7 billion annualized run-rate as of February, representing a solid 14 per cent year-over-year increase, according to Atkinson.
“Our target price equates to 1.5x 2024e EV/sales – in line with the peer group’s average 2024e EV/sales multiple, and very reasonable for a legal CPG company with meaningful expected organic growth over the next couple of years and rising Adj. EBITDA margins as well,” Atkinson wrote.
The analyst noted that BZAM is continuing to target positive adjusted EBITDA and positive free cash flow during 2023. After reviewing the quarter, Atkinson is now expecting full 2023 net revenue of $102.7 million (previously $105.3 million) and adjusted EBITDA of $0.8 million (previously $0.9 million).
“Our target price is unchanged at $0.65 per share, or 1.5x 2024e EV/sales — in line with the peer group’s average 2024e EV/sales multiple and very reasonable for a legal CPG company with meaningful expected organic growth over the next couple of years and rising Adj. EBITDA margins as well,” he said.
“However, given where closest peer Organigram’s shares currently trade, a full move towards our target price may require a resurgence in overall investor sentiment towards the Canadian cannabis LP sector,” Atkinson said.