Here's What Investors Need To Know About Colombia's Cannabis Market, An Analysis Of Flora Growth's Earnings

Flora Growth Corp. FLGC kicked off the week by reporting a 604% year-over-year revenue increase totaling roughly $15 million for the first half of fiscal 2022.

Cantor Fitzgerald's analyst Pablo Zuanic revealed in his recent note that the company's revenues were below both his and FactSet estimates of $16.2 million and $17.5 million, respectively.

The company's stock lost nearly 60% of its value year-to-date, as many other publicly traded companies within the cannabis sector. However, during the pre-market session on Wednesday morning, the company's shares traded 0.20% higher at $0.88 per share, the highest price in nearly three months.

The Analyst

Zuanic retained a Neutral rating on the company's stock and a price target of $0.85.

The Thesis

In its earnings report, the company said it's keeping its CY22 sales guidance of $35-45Mn, implying that sales for the second half of the fiscal would range between $20 million and $30 million. These figures would be primarily determined by the company's commercial wholesale business, including exports of and derivatives from Colombia, as well as the success of its CBD and vape battery brands, Zuanic said.

"Longer term, export growth and developments in the Colombian market (legalization) are key potential catalysts to watch," noted the analyst, who initiated the coverage of Flora earlier this month.

Flora's chairman and CEO, Luis Merchan, met with Colombian Senator Gustavo Bolivar prior to the introduction of a cannabis legalization bill sent to Congress on July 20. They discussed the top tenants of the measure and its implications for companies such as Flora in Colombia, as well as what legalization means for the country's burgeoning domestic and international cannabis markets. Several days later, Bolivar filed a bill to legalize adult-use cannabis in the South American country.

With Gustavo Petro, who took office as president of Colombia earlier this month, and his party, Pacto Historico, which has a majority in Congress, social and political momentum around the legalization of recreational marijuana is building.

Meanwhile, Zuanic also highlighted the company's intention to avoid a capital injection, adding that the company's management believes that "top-line growth, improving profit margins, inventory usage, and reduced cash burn, should help the company fund its needs."

Despite an $8.2 million adjusted EBITDA loss in the first half of 2022, Flora projects break-even EBITDA by year-end.

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Photo: Courtesy of geralt and Kindel Media by Pixabay

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Posted In: Analyst ColorCannabisEarningsLatin AmericaNewsPenny StocksMarketsCantor FitzgeraldColombiaearnings reportGustavo BolivarGustavo PetroLuis MerchanmarijuanaPablo Zuanicstock analysis

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