Aurora, Cronos appoint CEOs as Village Farms acquires remaining shares of Pure Sunfarms
In this week's "Rising High," The Fly's recurring series focused on cannabis stock news, The Fly looks back at CEO appointments, an acquisition and product launches.
AURORA APPOINTS CEO: Aurora Cannabis (ACB) announced Tuesday that Miguel Martin has been appointed chief executive officer, effective immediately. Michael Singer, who has served as interim CEO since February 2020, has stepped down from his temporary role and will remain executive chairman. Martin previously served as Aurora’s chief commercial officer.
The company also guided to Q4 net revenue C$70M-C$72M, which includes C$66M-C$68M in cannabis net revenue and compares to analyst estimates of C$74.15M. Additionally, Aurora said it expects to record up to C$1.8B in goodwill impairment charges in Q4 and now anticipates positive adjusted EBITDA in 2Q21.
Following the announcement, Ladenburg analyst Glenn Mattson downgraded Aurora to Neutral from Buy. The analyst believes Aurora has moved past its most dire period in terms of liquidity though the pace of the turnaround is slower than he had expected. The peer multiple for Canadian LPs has dropped significantly over the last 6 months and Aurora is now trading in-line with the peer group before adjustments to estimates, he adds, arguing that he cannot justify a premium multiple given the slower recovery. Meanwhile Cantor Fitzgerald analyst Pablo Zuanic lowered the firm's price target on Aurora to C$17.50 from C$29, citing reduced EBITDA estimates. The analyst kept an Overweight rating on the shares, saying he thinks the valuation is attractive even on the revised outlook and believes shareholders will benefit from a future cycle of mergers among Canadian LPs. Additionally, Stifel analyst W. Andrew Carter lowered the firm's price target on Aurora to C$10.50 from C$16 and kept a Hold rating on the shares. The analyst, who views the update "negatively overall," thinks it will be difficult to be more positive on the shares without demonstrated sustainable growth.
CRONOS APPOINTS CEO: Cronos Group (CRON) announced Wednesday that its board of directors has appointed Kurt Schmidt president and CEO of the company. The company also announced that Mike Gorenstein has been appointed executive chairman. Gorenstein has served as chairman, president and CEO of Cronos Group since 2016. Schmidt served as director and CEO of Blue Buffalo Company from 2012 through 2016.
Following the announcement, Stifel analyst Andrew Carter reiterated a Hold rating and C$8 price target on Cronos. Carter believes the transition is a "natural part" of the company's evolution with Cronos appointing a "well-qualified" operating executive to lead the company and Gorenstein moving to a full-time role fully leveraging his expertise with a "likely enhanced" focus on M&A. The analyst added he thinks Cronos is "well positioned" to capitalize on the development of the global cannabis category given abundant optionality stemming from nearly $1.4B in cash in hand.
VILLAGE FARMS TO ACQUIRE PSF SHARES: Village Farms (VFF) announced Tuesday it has entered into a definitive purchase and sale agreement with Emerald Health (EMHTF) to acquire 36,958,500 common shares of Pure Sunfarms owned by Emerald, representing approximately 41.3% of the issued and outstanding common shares of Pure Sunfarms. Upon completion of the transaction, Village Farms will own 100% of the common shares of Pure Sunfarms. The total purchase price of C$79.9M will be satisfied through a C$60M cash payment and a C$19.9M promissory note due six months from the closing date. The transaction, which will be immediately accretive to Village Farms' net income, is subject to customary closing conditions, approval by Pure Sunfarms' and Village Farms' lenders and approval by Emerald shareholders and is expected to be completed in late October 2020. Upon completion of the transaction, the existing Pure Sunfarms shareholders agreement between Village Farms and Emerald will terminate, Pure Sunfarms' management and employees will become part of the Village Farms organization and Village Farms will immediately begin fully consolidating the financial results of Pure Sunfarms.
Following the news, Raymond James analyst Rahul Sarugaser raised the firm's price target on Village Farms to $20 from $14 and kept an Outperform rating on the shares. Additionally, Roth Capital analyst Scott Fortune said he believes the deal solidifies Village Farms position as "a leading, low cost producer of cannabis in the Canadian market." The analyst, who projects Village could hit its targeted 20% market share to become one of the top suppliers to all provinces as the market matures and consolidation plays out, reiterated his Buy rating and $10 price target on the shares.
PRODUCT LAUNCHES: Canopy Growth (CGC) announced Thursday the launch of Martha Stewart CBD, a new line of hemp-derived wellness supplements, with flavor profiles inspired by some of Martha's recipes. The initial product offering will include a range of human wellness supplements, with a gift box and pet line launching later this year. The new portfolio of natural wellness gummies, softgels and oil drops are formulated by Martha Stewart, in collaboration with the cannabinoid scientists at Canopy Growth, to deliver a daily dose of pure, premium CBD isolate.
Meanwhile on Thursday, CV Sciences (CVSI) announced its continued expansion into condition specific dietary supplements with the launch of CV Defense, the second of several products to be launched under its new Immunity product line, following the launch of CV Acute in August. CV Defense is a clinically supported immune formula that provides effective daily support for barrier immunity, innate immunity, and adaptive immunity.
Additionally on Thursday, Cresco Labs (CRLBF) announced the launch of its newest cannabis brand Good News. The product line includes pre-rolled shorties, disposable vape pens, and gummy edibles made with oil.
IIPR INITIATED WITH AN OVERWEIGHT: Piper Sandler analyst Daniel Santos initiated coverage of Innovative Industrial Properties (IIPR) on Tuesday with an Overweight rating and $150 price target. The analyst likes the company's 13% cash yields and 600%-plus dividend growth and views the federal ban as a positive for the only cannabis real estate investment trust. While 33 states and counting have already legalized medical cannabis, absent a Democrat Senate sweep, the federal ban is not going away in the near term, Santos said. With interstate commerce banned and the industry's limited access to capital markets, Innovative's status as the only cannabis REIT is unlikely to change for some time, according to Santos.
OTHER CANNABIS STOCKS: Other publicly-traded companies in the space include Akerna (KERN), Aleafia (ALEAF), Aphria (APHA), Auxly Cannabis (CBWTF), Biome Grow (BIOIF), CannTrust (CTST), Canopy Rivers (CNPOF), CordovaCann (LVRLF), Delta 9 (VRNDF), FluroTech (FLURF), General Cannabis (CANN), Greenlane (GNLN), Green Thumb Industries (GTBIF), GrowGeneration (GRWG), Harborside (HSDEF), HEXO (HEXO), Hemp Inc. (HEMP), India Globalization Capital (IGC), Indiva (NDVAF), Indus Holdings (INDXF), Khiron Life Sciences (KHRNF), Liberty Health Sciences (LHSIF), MediPharm (MEDIF), MedMen (MMNFF), MJardin (MJARF), Neptune Wellness (NEPT), Omnicanna (ENDO), Organigram (OGI), Planet 13 (PLNHF), Sproutly (SRUTF), Sunniva (SNNVF), Supreme Cannabis (SPRWF), Valens (VLNCF), Tetra Bio-Pharma (TBPMF), Tilray (TLRY), Trulieve (TCNNF), Vireo Health (VREOF), Wayland Group (MRRCF), WeedMD (WDDMF), Wildflower Brands (WLDFF), YSS Corp. (YSSCF), Zynerba (ZYNE) and 4Front Ventures (FFNTF).