Auxly Cannabis is a winner, this analyst says

Haywood Securities analyst Neal Gilmer raised his target for Auxly Cannabis Group (Auxly Cannabis Group Stock Quote, Chart, News, Analysts, Financials TSX:XLY) to $4.50 from $4.00 after the company reported record third-quarter revenue and stronger-than-expected margins, prompting upward revisions to his earnings forecasts.

In a Nov. 12 report, Gilmer maintained his “Buy” rating on the Canadian cannabis producer, saying its growing market share, operating efficiency and improved balance sheet support his outlook.

“Auxly reported continued solid financial results in Q3/26, with both revenue and EBITDA exceeding our expectations,” Gilmer said.

Auxly posted third-quarter revenue of $49.5-million, up 24% year-over-year and 8% from the previous quarter, exceeding Gilmer’s $46.1-million estimate. Adjusted EBITDA increased 29% year-over-year to $15.8-million, ahead of his $14-million forecast. The Adjusted EBITDA margin reached 32%, compared with his 30.4% estimate. Gross margin improved to 56.2% from 55.5% a year earlier, exceeding Gilmer’s 54.5% forecast. Revenue growth was driven by higher sales volumes across the company’s core products and improved dried flower pricing, partially offset by lower vape prices. Auxly generated $14.2-million in free cash flow and $14.8-million in operating cash flow before working capital changes during the quarter.

The company continues to benefit from the performance of its Back Forty brand, which holds leading positions across several major Canadian cannabis categories.

“In Q3, Auxly ranked as the #2 LP in Canada by retail sales, with Back Forty leading the way as the #1 brand in the country,” Gilmer said. “As of Q3, Back Forty was also the #1 best-selling brand across multiple categories, including pre-rolls, all-in-one vapes and flower. Dried flower and pre-rolls made up 64% of revenue in the quarter, with the remainder from Cannabis 2.0 products.”

Auxly ended the quarter with $51.4-million in cash and cash equivalents and $43.4-million in debt. Gilmer said debt reduction transactions completed in 2025 have improved the company’s financial position, allowing it to invest in additional production capacity.

Management reiterated plans to spend up to $30-million on capital expenditures through 2028, which it expects will increase production capacity by approximately 30% from 2025 levels while improving cultivation and processing efficiency. The company also continued repurchasing shares, buying back 2.7 million shares for $6.1-million during the first nine months of 2026 and another 567,000 shares for $1.9-million after quarter-end.

Following the results, Gilmer increased his fiscal 2026 revenue forecast to $185.2-million from $181-million and his Adjusted EBITDA estimate to $57.9-million from $55.4-million. For fiscal 2027, he raised his revenue estimate to $200.8-million from $196.3-million and his Adjusted EBITDA forecast to $61.1-million from $57.8-million. He also increased his 2027 Adjusted EBITDA margin assumption to 30.4% from 29.5%.

“Following a full review of the financials and conversations with management, we have revised our margin assumptions upward for both Q4 and 2027 to better reflect the operating leverage in the business,” Gilmer said. “In our view, our forecast remains conservative given Auxly’s track record of outperforming.”

Gilmer said the company’s market position and improved financial performance could attract greater investor interest. “In our opinion, Auxly has demonstrated the quality of its brands by obtaining the third-largest market share. Following the debt reduction transactions last year the Company is now poised to capture investors’ attention,” he said.

The analyst’s price target is based on nine times estimated 2027 EBITDA, discounted by 10%, compared with a previous discount of 15%. Auxly trades at approximately 5.9 times Gilmer’s 2027 EBITDA estimate, compared with 5.7 times for its Canadian cannabis peers.

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