PI Financial’s Jason Zandberg on Wednesday launched coverage of US cannabis company Red White & Bloom (Red White & Bloom Stock Quote, Chart, News CSE:RWB) with a “Buy” rating and C$2.50 target, saying that RWB is set to be a powerhouse in Michigan’s hot cannabis market. Red White & Bloom went public on the CSE in April of this year through a reverse takeover of Tidal Royalty, with the company having since then struck a number of deals. In July, RWB, through its debenture investments in PharmaCo, exercised its right to acquire the company and is now awaiting regulatory approval (expected in mid to late-October). The PharmaCo acquisition would give RWB ten currently-operating dispensaries in Michigan and eight more that are in various stages of development. PharmaCo also has three indoor grow facilities, one outdoor grow and another large indoor facility currently under construction. In June, RWB acquired the licensing rights to well-known cannabis brand High Times for the states of Michigan, Illinois and Florida, with the company’s plan being to introduce High Times-branded products through both its own and third-party stores. Then, last month, RWB closed on the acquisition of a group of California-based companies under the name Platinum Vape, whose products are sold at over 700 retailers in Michigan, California and Oklahoma. Along with the acquisitions, RWB also owns a 3.2 million sq ft greenhouse in Illinois currently licensed to grow hemp. Zandberg estimated the ten existing PharmaCo stores to have achieved about $70 million in trailing revenue over the past 12 months, while the rebranding of RWB’s Michigan dispensaries under the High Times banner is likely to bring “instant brand recognition,” he said. On the state of pot in Michigan, Zandberg estimates it has been growing at an annualized rate of 566 per cent this year. “Even before re-branding its dispensaries under the High Times brand and coordinating its sales efforts, RWB revenue per dispensary is slightly above the average of the top performing MSOs. Given our bullishness of the Michigan market, we believe RWB can be at or near the top of this list in the future,” Zandberg wrote. “We believe RWB is the best vehicle to invest in the Michigan cannabis market. Thus far in 2020, Michigan has reported the fastest growing cannabis market in the US. The states of Illinois (medical and adult-use) and Florida (medical only) have typically been framed as the best markets in 2020 but Michigan eclispes both of those markets in terms of both growth rate of sales as well as overall size,” Zandberg wrote. On the cannabis market in the US in general, Zandberg is positive, arguing that regulatory movement could act as a catalyst for cannabis stocks. “We believe that trading multiples are likely to increase over the next 12 months as more capital flows into the US cannabis sector. We believe the number of catalysts in the US cannabis sector are numerous – including new states creating adult-use cannabis markets and changes to federal regulations around cannabis (MORE Act, STATES Act, SAFE Act),” he wrote. Zandberg said the evolving US cannabis market has seen two approaches so far by so called multi-state operators: wide-angle coverage which calls for obtaining licenses in as many states as possible and is represented by industry leader Curaleaf and the narrow angle approach which focuses on obtaining market share in a smaller footprint and is epitomized by Trulieve in Florida. On that scale, Zandberg puts RWB in the latter camp, saying the Michigan market is on track for combined medical and rec sales of $1 billion in 2020. “Even before re-branding its dispensaries under the High Times brand and coordinating its sales efforts, RWB revenue per dispensary is slightly above the average of the top performing MSOs. Given our bullishness of the Michigan market, we believe RWB can be at or near the top of this list in the future,” Zandberg wrote. The analyst is forecasting fiscal 2020 (year end December 31) revenue and EBITDA of $40.3 million and $4.9 million, respectively, fiscal 2021 revenue and EBITDA of $293.4 million and $70.0 million, respectively, and fiscal 2022 revenue and EBITDA of $381.4 million and $125.4 million, respectively. (All figures in US dollars except where noted otherwise.) Since its debut, Red White & Bloom’s share price has drifted lower, currently trading down 42 per cent. At press time, Zandberg’s 12-month target of C$2.50 represented a projected return of 381 per cent. Commenting in June on his company’s approach to expansion in the US, RWB CEO Brad Rogers said his company is aiming to be a ‘Super-state operator’ rather than Multi- state, saying in an interview on TraderTV Live, “We’re very disciplined in what we’re doing. We call ourselves Super State Operators. We’re not a multi-state operator. We’re super state, meaning that we go in with a big footprint, and we dominate wherever we go,” Rogers said. Last month, RWB closed on a $25-million bought deal led by PI Financial and Eight Capital, with the company intending to use the proceeds to finance M&A activity, ongoing operations, expansion of the executive team, ongoing regulatory matters, inventory, ongoing capital expenditures and general corporate purposes.