This analyst just raised his price target on Village Farms

Village Farms International is proving its strength is no fluke. After back-to-back quarters of record profitability, the Delta, B.C.–based grower and cannabis producer has shown that its breakout second quarter wasn’t a one-off, according to Beacon Securities analyst Doug Cooper.

In a Nov. 10 report, Cooper maintained his “Buy” rating and raised his target price on Village Farms (Village Farms International Stock Quote, Chart, News, Analysts, Financials NASDAQ:VFF) to US$5.25 from US$4.50, saying third-quarter results confirmed the company’s momentum across all business lines.

“A second consecutive quarter of exceptional results from Village Farms confirms that the Q2 results were not an anomaly but rather that the Q3 results confirm a trend,” Cooper wrote.

Village Farms International is a vertically integrated controlled-environment agriculture company that produces and distributes both greenhouse-grown produce and cannabis products for Canadian, U.S., and international markets.

Village Farms reported third-quarter revenue of US$67.7-million, including US$46.6-million (C$64.1-million) from Canadian and international cannabis sales, up 5% sequentially; US$3.3-million from U.S. cannabis and hemp; US$3.6-million from its Netherlands cannabis operations, up 45% as the facility reached capacity; and US$12.8-million in produce revenue, up 48% sequentially in its seasonally strongest quarter.

Revenue mix drove record profitability, with international cannabis sales rising to C$16.3-million, or 25% of total Canadian cannabis revenue, compared with C$2.5-million, or 5%, a year earlier. SKU mix in Canada also supported gross margins above 50%, well above the company’s 30–40% target range.

Village Farms posted consolidated Adjusted EBITDA of US$20.3-million, an industry-leading margin of about 30%, up from 21.6% in the previous quarter. Its Canadian cannabis operations, including international sales, achieved a margin of 41.4%, while the Netherlands segment delivered 35% in only its second quarter of operation. The company generated US$23-million in free cash flow, increasing its cash balance to US$88-million and ending the quarter with a net cash position of approximately US$53-million.

Cooper said management’s earlier view that the record-breaking Q2 performance could be sustained “has now been proven correct.” He noted that “not only were the Q2 results repeatable, but they were beatable.”

In his analysis, Cooper pointed to continued expansion in the Netherlands and the company’s Canadian D2 facility conversion as key growth drivers. In the Netherlands, Village Farms’ products are now available in 91% of participating coffeeshops, and construction of a second, larger facility, expected to increase capacity fivefold, is on track to begin operations in early fiscal 2026. The Netherlands business generated US$3.6-million in Q3 revenue, equivalent to US$15-million annualized, and could exceed US$50–60-million annually once the second facility is fully operational.

Meanwhile, the conversion of the D2 facility is expected to add 40 metric tonnes of production capacity, or about 40 million grams, which could translate to an additional US$60-million in revenue by fiscal 2027 based on current pricing. Cooper said those two projects combined could lift total annual revenue by more than US$100-million over the next two years.

“Between these two organic growth projects, VFF could add $100+ million of incremental revenue versus its current pro forma profile by FY27,” Cooper said. “That would indicate that a run rate of $350+ million in revenue and $90 million in EBITDA is possible sometime in FY27.”

Cooper noted that even after seasonal adjustments, Village Farms’ current earnings power implies a valuation multiple of roughly 5x EBITDA, well below the 8–12x range of comparable peers.

“No peer has the growth potential or ability to generate a return on equity of 15%,” he said, referring to the company’s performance in the latest quarter.

Cooper forecasts fiscal 2025 revenue of US$207.1-million and Adjusted EBITDA of US$41.8-million, improving to US$249.5-million and US$56.9-million, respectively, in fiscal 2026.

He said his US$5.25 target is based on a 10x multiple of his fiscal 2026 EBITDA forecast, adding that Village Farms’ combination of profitability, balance sheet strength, and international expansion potential “solidifies its status as one of the most compelling growth stories in the cannabis sector.”

Disclosure: The family of Cantech Editor Nick Waddell owns shares of Village Farms.

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