Echelon Capital Markets analyst Andrew Semple is staying bullish on Canadian cannabis retailer Fire & Flower (Fire & Flower Stock Quote, Chart, News, Analysts, Financials TSX:FAF) after the company\u2019s latest quarterly results. In an update to clients on Tuesday, Semple maintained his \u201cSpeculative Buy\u201d rating while raising his target price from $1.75 to $1.90, which at the time of publication represented a projected one-year return of 82.7 per cent. Toronto-headquartered Fire & Flower is a cannabis retailer with 80 stores in its network, a line of branded cannabis products and accessories and a cannabis analytics platform, Hifyre. The company has a strategic investment from convenience store giant Alimentation Couche-Tard. FAF reported Q4 2020 results (fiscal year ended January 30) on Tuesday, showing total fourth quarter revenue of $43.2 million, up 157 per cent year-over-year and up 31 per cent sequentially, and adjusted EBITDA of $1.5 million compared to a loss of $5.26 million a year ago and positive $1.2 million for the Q3 2020. Get Cantech Top Analyst picks before anyone else does. Cantech Alerts delivered straight to your inbox. Click here for this free service. For the 2020 fiscal year, Fire & Flower posted total revenue of $128.1 million, which was up 150 per cent from 2019\u2019s $51.1-million topline. Adjusted EBITDA for the year was positive at $20,000. At the end of the year, FAF completed the acquisition of Ontario-based cannabis retailer Friendly Stranger, while post-Q4, Fire & Flower entered into a strategic licensing partnership and acquisition option with American Acres, a company that intends on operating dispensaries in California, Arizona and Nevada, including the first Fire & Flower branded store expected to open in Palm Springs in 2021. In his Q4 comments, FAF CEO Trevor Fencott called 2020 a challenging but transformative year for the company. \u201cFrom an operating standpoint, we continued to make significant progress as we grew from 21 stores at the beginning of 2019 to 80 stores today, which includes the recent acquisition of Friendly Stranger,\u201d Fencott said in a press release. \u201cBuilding on top of our record growth is our recently signed strategic licensing partnership and acquisition option with American Acres, which provides us with an opportunity for considerably greater expansion as it serves as an entry point into the sizeable US cannabis market,\u201d Fencott said. Looking at the fourth quarter numbers, Semple called them a positive for the company and stock, where Q4 revenues of $43.2 million were better than the consensus call for $38.0 million and in line with Semple\u2019s Street-high $43.3 million forecast. Semple noted that all three of FAF\u2019s segments were strong, with retail sales up 25.0 per cent quarter-on-quarter, wholesale sales grew by 36.5 per cent sequentially and digital revenues were up 110.4 per cent. While margin also improved across all segments, EBITDA was a little light at $1.5 million compared to Semple\u2019s $2.3-million estimate, with the consensus standing at $1.5 million. Semple said the lower EBITDA was likely temporary, however, as both professional fees and marketing expenses were higher than normal for the quarter. Semple said the highlight of the quarterly financials was the 110-per-cent sequential increase from Hifyre, where the platform had sales of $3.1 million, most of which was recurring and high-margin in nature, showing that FAF\u2019s investment in Hifyre is now paying dividends. \u201cThe Company is well positioned to continue expanding in the Canadian cannabis market, while it is also exploring international growth opportunities,\u201d Semple wrote. Get Cantech Top Analyst picks before anyone else does. Cantech Alerts delivered straight to your inbox. Click here for this free service. \u201cIts agreement with American Acres provides Fire & Flower the optionality to acquire a US cannabis business once federal and stock exchange regulations permit it to do so,\u201d he said. \u201cManagement also noted the potential to explore other international markets for potential retail opportunities. To this end, we estimate Fire & Flower maintains a cash balance of ~$40 million, above what is required for organic growth. This could be potentially earmarked for continued retail acquisitions in Canada, or in other developing international cannabis markets.\u201d \u201cThe Company\u2019s comprehensive Hifyre digital ecosystem appears to be hitting its stride, and we look for further positive updates in the months ahead,\u201d Semple said. The analyst noted FAF\u2019s recent debenture conversion which brought the company debt down to $5 million. Combining that with the $40-million in cash position and what looks to Semple like sustainable free cash flow and the company is now in \u201ca very cozy capital situation,\u201d according to the analyst. Semple has rejigged his estimates and is now calling for fiscal 2021 revenue and adjusted EBITDA of $230.6 million and $18.9 million, respectively, and for 2022 revenue and adjusted EBITDA of $344.1 million and $38.4 million, respectively. Semple said Fire & Flower\u2019s now derisked capitalization and improved high-margin digital business warrant a higher valuation, where the stock currently trades at 1.6x\/19.0x his fiscal 2021 sales\/EBITDA estimates and 1.0x\/9.4x his 2022 sales\/EBITDA numbers. \u201cWe do not believe this valuation fully reflects Fire & Flower\u2019s steep growth trajectory and optionality inherent in its Hifyre digital platform as well as in its strategic relationship with Alimentation Couche Tard,\u201d Semple wrote. Fire & Flower is up 18 per cent year-to-date and up 64 per cent over the past 12 months. Get Cantech Top Analyst picks before anyone else does. Cantech Alerts delivered straight to your inbox. Click here for this free service.