In the post-Cresco Labs era, Columbia Care (Columbia Care Stock Quote, Chart, News, Analysts, Financials CSE:CCHW) is still a buy, says Roth MKM analyst Scott Fortune.
On July 31, Cresco Labs and Columbia Care mutually decided to call off their proposed merger.
“In light of the evolving landscape in the cannabis industry, we believe the decision to terminate the planned transaction is in the long-term interest of Cresco Labs and our shareholders. We want to express our sincere gratitude to Columbia Care for their valuable collaboration and dedication during this transaction,” said Cresco CEO Charles Bachtell.
The Roth analyst says that in light of that development, CCHW is now free to shore up its own balance sheet.
“CCHW management was planning on addressing its balance sheet earlier, but was held up due to the pending Cresco Lab merger,” Fortune explained. “Now operating as a standalone business, the company was able to execute on equitizing a significant portion of its debt, while raising $25M (option to add
$25M) to further reduce leverage, capitalizing on the recent runup of its stock (up over 200%) over the past month. Given the ~29 month drawdown across the cannabis industry, we believe the recent runup will allow levered companies to address these debt positions and provides another avenue to raise capital for long-term survival, despite the dilution.”
In a research update to clients September 20, Fortune maintained his “Buy” rating and one-year price target of $1.00 on Columbia Care.
The analyst thinks CCHW will post EBITDA of $81.7-million on revenue of $520.3-million in fiscal 2023. He expects those numbers will improve to EBITDA of $107.2-million on a topline of $565.5-million the following year.