John Zamparo, equity research analyst with CIBC Capital Markets, reaffirmed that the Canadian company remains his top pick in the sector and assigned a 12 to 18 month price target of C$7.
The cannabis company, an investment division launched by Canopy Growth (NYSE:CGC,TSX:WEED), reported a net loss of C$2.9 million for its most recent quarter.
The analyst said he has rated the stock an “outperformer” because of the company’s approach when it comes to capital allocation, its supply contracts and its valuation, which he said is at an all-time low.
Zamparo noted that, despite the third straight monthly double-digit increase in sales for the cannabis space, there’s been a drop in the performance for some of the players. To explain why this is, the analyst said, “(The industry has) rarely traded on fundamentals.”
Canopy Rivers informed investors it expects to see continuing losses due to the development of its investments across the global cannabis market.
“As these equity method investees continue to ramp-up operationally over the coming quarters, management expects to continue to recognize its share of net losses during the remainder of the fiscal year,” the company said in a statement.
Narbe Alexandrian, president and CEO of the firm, also highlighted the development of its investee PharmHouse, which signed a supply agreement with Canopy Growth in May.
Despite its losses, Canopy Rivers CFO Eddie Lucarelli said the company holds strong potential to maintain its position moving forward. In a statement, he said:
“While some of our financial results are linked to the public markets and therefore subject to volatility, we believe that several factors — including significant business catalysts within our portfolio, operational improvements that translate into increased production at our royalty investees, and an operating expense base that is low by cannabis sector standards — position us well to create value for our shareholders in the long term.”
Shares of Canopy Rivers fell after its results release. The decline of just over 5 percent resulted in the company opening Wednesday’s trading session at a price per share of C$2.22. As of 3:48 p.m. EDT on Wednesday, shares of Canopy Rivers were trading at C$2.20, indicating a drop of almost 1 percent.
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Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.