Cannara Biotech is a buy, Research Capital says

Research Capital analyst Greg McLeish said in a July 29 update that Cannara Biotech (Cannara Biotech Stock Quote, Chart, News, Analysts, Financials TSXV:LOVE) delivered a strong fiscal third quarter, beating expectations on revenue and operating performance. The company reported $27.3-million in revenue for the period ended May 31, 2025, ahead of McLeish’s $26.3-million forecast and up from $19.5-million a year earlier, driven by new product launches and broader market penetration.

McLeish maintained his “Buy” rating and $3.00 target price for the stock.

“Gross margin of 44% was well ahead of our 40% estimate, reflecting increased production capacity and operational efficiencies,” he said. Adjusted EBITDA rose to $7.6-million, exceeding the $5.2-million forecast and more than doubling year-over-year. Net income came in at $4.1-million, or $0.04 per share, also beating expectations.

“Cannara is scaling its production platform through a disciplined, modular expansion strategy that more than doubles current capacity for a total capital investment of just $22-million,” McLeish said. “Through extensive R&D and optimization of cultivation practices, the company has achieved a 26% increase in yield, raising its annual production capacity from 39,500 kg to 50,000 kg, reaching its original F2026 target a full year ahead of schedule and without incremental capital outlay. Looking forward, Cannara has revised its production targets upward: to 65,000 kg in F2027 (from 62,500 kg) and to 80,000 kg in F2028 (from 75,000 kg). At full build-out, the Valleyfield facility is designed to support up to 100,000 kg of annual output, offering substantial latent capacity and long-term operating leverage as demand continues to scale.”

Cannara plans to complete a $10-million processing centre at its Valleyfield facility during fiscal 2026. The new centre will provide the drying and trimming capacity needed to support expansion across grow rooms 13 to 24.

McLeish said the expected legalization of cannabis vape cartridges in Quebec by late 2025 could be a major structural growth catalyst for Cannara. Though currently banned, about 25% of Quebec consumers already use vapes through illicit channels, revealing strong underlying demand.

“On July 24, Cannara announced the preliminary approval of five vape SKUs, comprising both live resin and solventless live rosin formats, for province-wide distribution,” he said. “These products represent 20% of the 25 vape SKUs the SQDC intends to launch across its 107 retail outlets by calendar year-end. Given Cannara’s ~12% retail market share in Quebec and its position as Canada’s leading provider of live resin vapes, the company is exceptionally well-positioned to capitalize on this new category in its core provincial market.”

McLeish thinks that Cannara will do $25.1-million in Adjusted EBITDA on revenue of $104.0-million in fiscal 2025. He thinks those numbers will improve to $33.7-million on revenue of $121.2-million in fiscal 2026.

He said the rating and target are unchanged, backed by Cannara’s cost-efficient Quebec base, vertical integration, and strong premium product execution. Q3 results reflect solid cost discipline and growth in categories like vapes and concentrates. The target is based on 8.0x FY2027 EBITDA.

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