Tilray reports lower-than-expected revenue as GrowGeneration to acquire hydroponic garden centers
In this week's "Rising High," The Fly's recurring series focused on cannabis and psychedelic stock news, The Fly looks back on earnings, acquisitions and an analyst initiation.
TILRAY REPORTS Q4 EARNINGS:On Wednesday, Tilray (TLRY) reported fourth quarter earnings per share of 18c on revenue of $142.2M, which compared to loss per share of 39c and revenue of $113.5M in the prior year quarter. Irwin Simon, Tilray’s Chairman and CEO, stated, “Early results from the new Tilray affirm that, while the global cannabis market remains in its early stages, our vision, scale, access to resources and operational excellence position us optimally to capitalize on the opportunity. In a very short period of time since our business combination was finalized, we transformed and strengthened Tilray, delivered solid results amid continued COVID-19 lockdowns and restrictions and achieved $35M in synergies to date – well on our way to delivering $80M in cost savings over the next 16 months.”
Following earnings, Roth Capital analyst Scott Fortune notes that Tilray reported partially consolidated financials after the merge with Aphria, which brought lower-than-expected revenue, offset by a beat on the profitability side as the combined entity realized $35M in cost synergies. The analyst believes the company is positioned for further consolidation with $488M in cash and is actively evaluating both the U.S. CPG and cannabis opportunities, with Canada showing signs of recovery. Fortune has a Neutral rating and a price target of $25 on the shares.
GROWGENERATION TO ACQUIRE HGS HYDRO: GrowGeneration (GRWG) announced Thursday it signed an asset purchase agreement to acquire HGS Hydro, the nation's third-largest chain of hydroponic garden centers, with six stores across Michigan and a seventh store slated to open in the fall of 2021. This transaction is expected to close before the end of FY21. Founded in 2015 by Rocky Shaeena, HGS Hydro is the largest chain of hydroponic garden centers in the state of Michigan and generated approximately $50M in revenue in 2020. When completed, the transaction will also bring the total number of GrowGen hydroponic garden centers in Michigan to 14 and the total number of stores to 65.
IM CANNABIS ACQUIRES PHARM YAROK, ROSEN HIGH WAY, HW SHINUA: IM Cannabis (IMCC) announced Wednesday the acquisition of the outstanding ordinary shares of R.A. Yarok Pharm, Rosen High Way and High Way Shinua by IMC Holdings. IMC Holdings concurrently executed definitive share purchase agreements to acquire all of the outstanding ordinary shares of each of Pharm Yarok in central Israel; Rosen High Way in Israel and HW Shinua, the receipt of which would permit HW Shinua to transport large quantities of medical cannabis to and from Pharm Yarok's pharmacy and Rosen High Way's distribution center and to and from third parties in the medical cannabis sector. The aggregate consideration for the acquisition is approximately $4.6M in cash, of which $1.3M shall be invested in IMC in consideration for IMC's equity by the shareholders of Pharm Yarok, Rosen High Way and HW Shinua. Closing of the Acquisition is conditional upon receipt of all requisite approvals, including from the IMCU. The collective current annual revenue run rate of Pharm Yarok, Rosen High Way and HW Shinua is approximately $8M with an expected positive EBITDA of approximately $1M. Upon closing, the acquisition is expected to integrate assets that include a license to sell medical cannabis to patients, a large customer service centre, a virtual store and online properties, intellectual property, a logistics and warehousing centre with specialized storage space for over 350 kg of medical cannabis as well as a large customer base.
Additionally on Thursday, Alliance Global Partners analyst Aaron Grey noted that on Wednesday, the Jerusalem Post reported that the Knesset failed to pass a bill that would further decriminalize cannabis in Israel, and legalize CBD. While the analyst was bullish on the Knesset passing cannabis legislation after cannabis reform was high on the agenda of the new coalition, he still sees an opportunity for the coalition for the government to pass a bill next year. Meanwhile, Grey looks for IMC and other Canadian LPs selling into the Israeli market to continue benefiting from the growing medical market in Israel, where the patient count has grown 55% year-over-year. Grey keeps a Buy rating and C$10 price target on IM Cannabis shares.
CLEVER LEAVES INITIATED WITH BUY: Canaccord Genuity analyst Bobby Burleson initiated coverage of Clever Leaves (CLVR) on Tuesday with a Buy rating and $13 price target. The analyst said he believes the company is "uniquely positioned" as a low-cost producer of flower and extracts through its Colombian cultivation and extraction facility, particularly following Colombia's recent decree lifting restrictions on flower exports. Clover's Nasdaq listing "further differentiates the company" by attracting institutional investor capital and allowing access to debt at more conventional costs, Burleson said. He believes the stock is deserving of a premium valuation.
The company also announced on Tuesday a joint partnership with Biopharmaceutical Research Company with the intent to study the DNA sequence variation of three Clever Leaves’ cannabis cultivars as part of their Project Change Lives campaign. The University of California, Davis, through an accepted research sponsorship from BRC, will lead the extraction and analysis of DNA to elucidate genetic variants taken from various genetic lines of cannabis sativa.
TRULIEVE ANNOUNCES PRODUCTION LICENSE APPROVAL: Trulieve Cannabis (TCNNF) announced Monday that the Georgia Access to Medical Cannabis Commission announced its intent to award Trulieve a Class 1 production license. This license will further solidify Trulieve's presence in the Southeastern United States and introduce its premium products in Georgia's nascent medical cannabis market.
OTHER CANNABIS/PSYCHEDELIC STOCKS: Other publicly-traded companies in the space include Acreage (ACRHF), Akerna (KERN), Aleafia (ALEAF), Aurora Cannabis (ACB), Ayr Wellness (AYRWF), Body and Mind (BMMJ), Cannabics (CNBX), CanaFarma (CNFHF), Canopy Growth (CGC), RIV Capital (CNPOF), Columbia Care (CCHWF), Compass Pathways (CMPS), CordovaCann (LVRLF), Cresco Labs (CRLBF), Cronos (CRON), CV Sciences (CVSI), Curaleaf (CURLF), CURE Pharmaceutical (CURR), Delta 9 (DLTNF), Emerald Health (EMHTF), Fire & Flower (FFLWF), FluroTech (FLURF), General Cannabis (CANN), Gage Growth (GAEGF), Greenlane (GNLN), Green Thumb (GTBIF), Harborside (HBORF), Hemp (HEMP), HEXO (HEXO), High Tide (HITI), India Globalization Capital (IGC), Indiva (NDVAF), Inner Spirit (INSHF), Innovative Industrial Properties (IIPR), Khiron Life Sciences (KHRNF), Lowell Farms (LOWLF), Lotus Ventures (LTTSF), MediPharm Labs (MEDIF), MedMen Enterprises (MMNFF), MJardin Group (MJARF), Neptune Wellness (NEPT), Thermic Science (ENDO), Organigram (OGI), Planet 13 (PLNHF), Skye Bioscience (SKYE), SLANG Worldwide (SLGWF), Sproutly (SRUTF), Stem Holdings (STMH), Sundial Growers (SNDL), Sunniva (SNNVF), TerrAscend (TRSSF), Tetra Bio-Pharma (TBPMF), Valens (VLNCF), Village Farms (VFF), Goodness Growth (GDNSF), WeedMD (WDDMF), Zynerba (ZYNE) and 4Front Ventures (FFNTF).