Buy this Canadian pot stock, Research Capital says

Research Capital Corporation analyst Greg McLeish maintained his “Buy” rating and $3.50 target on Cannara Biotech (Cannara Biotech Stock Quote, Chart, News, Analysts, Financials TSX:LOVE) after the company expanded its international supply agreement with Curaleaf.

McLeish said the expanded agreement strengthens visibility on Cannara’s international growth opportunity.

The long-term supply agreement with Curaleaf International increases the potential aggregate contract value to about $34-million over two years from $21-million, a 62% increase.

“The expanded Curaleaf agreement strengthens our confidence in the company’s international growth opportunity, while the recently expanded $80-million syndicated credit facility provides additional financial flexibility to support its next phase of capacity expansion,” McLeish said.

The analyst believes the larger agreement validates Cannara’s product quality and its ability to use excess capacity at its Valleyfield facility to meet international demand.

Cannara now has 15 cultivation rooms active at Valleyfield. McLeish said the company previously had annualized production capacity of about 58,000 kilograms and is targeting about 75,000 kilograms during fiscal 2027.

Longer term, Valleyfield can support about 100,000 kilograms of annual production within Cannara’s existing owned footprint.

McLeish said that gives Cannara meaningful room to grow while maintaining a disciplined, demand-driven approach to capital spending.

Curaleaf is also supporting Cannara’s pursuit of EU-GMP certification for the Valleyfield processing centre. Until certification is obtained, cannabis supplied under the agreement will be dried and processed under EU-GMP conditions at Curaleaf’s certified Canadian facility before being released into international medical markets.

McLeish said EU-GMP certification remains an important potential catalyst because it could increase Cannara’s flexibility and participation in international markets.

Cannara also amended its syndicated credit facility with BMO and TD Bank, increasing total committed borrowing capacity to $80-million from about $50-million.

The facility includes a $40-million term loan and a $40-million revolving credit facility, with maturity extended to Dec. 31, 2029, from Dec. 31, 2027. McLeish said the refinancing also reduced borrowing costs.

The analyst argued that  the facility gives Cannara more flexibility to fund working capital, the Valleyfield processing expansion and additional cultivation capacity as demand develops.

Cannara is scheduled to report Q4 and fiscal 2026 results on Nov. 24. McLeish said he expects to update his fiscal 2027 forecasts after the release to reflect the expanded Curaleaf agreement and introduce fiscal 2028 estimates.

“We believe the additional financial and operational disclosure accompanying the year-end results should provide a more appropriate basis for assessing the timing and earnings contribution from Cannara’s expanding international business,” he wrote.

McLeish expects Cannara to generate Adjusted EBITDA of $31.6-million on revenue of $122.6-million in fiscal 2026, improving to Adjusted EBITDA of $38.6-million on revenue of $142.5-million in fiscal 2027.

His $3.50 target is based on 8.0 times his fiscal 2027 EBITDA estimate.

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