Cantor Fitzgerald’s Pablo Zuanic provided updated ratings and estimates on several stocks from the cannabis and CBD sector, those being – MedMen Enterprises (OTCQF: MMNFF), Jushi Holdings (OTCQB: JUSHF), cbdMD (AMEX: YCBD), and CV Sciences (OTCQB: CVSI).
The Analyst's View
On Thursday, Zuanic kept an ‘Underweight’ rating on MedMen stock, while in an earlier note, he withdrew their price target.
On Jushi stock, Zuanic maintains a ‘Neutral’ rating, while lowering their price target to $6.15 from $7.25.
Zuanic reiterated Cantor's ‘Neutral’ rating on cbdMD stock, lowering their price target to $3.25 from $4.10.
A 'Neutral' rating was kept as well for CV Sciences, while Zuanic withdrew the price target on the stock.
Over the last three months, the stock gained 18%, which compares to a 22% drop for the AdvisorShares Pure Cannabis ETF (ARCA: YOLO), mainly because of better market trends in California and Nevada, explained Zuanic.
MedMen stock is overvalued based on its fragile foundations, high leverage, earlier dilutive actions and lack of visibility in relation to positive EBITDA, the analyst noted.
Zuanic added they are concerned about the company’s relationship with Green Gotham Partners, specifically what it could bring for minority shareholders.
Jushi stock fell 28% in the last three months, which is a bit worse than the sector benchmark that dropped 22%.
“We believe the discount is fair given the company’s less developed nature vs. other MSOs and higher exposure to retail,” Zuanic highlighted.
While these problems are being resolved, Zuanic does not project “much of a re-rating” in the near future, based on which he chose to remain Neutral.
The analyst further decided to lower the price target based on sectoral de-rating – “our revised price target is based on a 20% discount to the sector average CY22 EV/EBITDA multiple.”
Consensus estimates for 2022 seem to be high when considering the original point - too much reliance on 3rd party product retailing and no vertical integration in crucial markets, Zuanic concluded.
CBD stocks often follow cannabis stock trends, as seen with cbdMD, which fell 26% in the last three months, explained Zuanic.
“At present, the stock trades at 4.2x our CY21 sales estimates (we are 10% below FactSet consensus) vs. Charlottes Web Holdings (OTCQX: CWBHF) at 5.4x; for CY22 these metrics are 3.6x for both stocks,” the analyst wrote.
Zuanic highlighted several investment risks including slowdown for the overall CBD space, new harsh FDA guidelines, lack of important sponsorships and others, which “could lead to further shareholder dilution.”
CV Sciences Thesis
Over the last three months, CV Sciences stock lost 35%, compared to a 6% gain for the S&P500, following the cannabis stock trend with AdvisorShares Pure Cannabis ETF YOLO drop of 22% over the same period.
“Due to poor stock liquidity, but also due to the lack of operational visibility and continued market share loss, we are withdrawing our price target. That said, we stay Neutral given the discount to peers,” Zuanic wrote.
MedMen shares were trading 4.19% lower at 26 cents per share at the time of writing.
Jushi shares were also down 0.23% trading at $5.35 per share
cbdMD shares slid 4.42%, trading at $3.03 per share and CV Sciences shares were trading 1.53% lower at 39 cents per share at the time of writing.
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