In a recent analyst note, Pablo Zuanic from Cantor Fitzgerald reviewed the earnings and market share goals of the Auxly Cannabis Group (OTCQX:CBWTF) (TSE: XLY), a leading consumer packaged goods company in the cannabis products market headquartered in Toronto, Canada.

The Analyst

Zuanic rated Auxly as Overweight and raised the 12-month price target to C$0.49 from C$0.40 on increased forward sales estimates.

The Thesis

Auxly sales in October and November are up 30% vs. the third quarter when comparing monthly averages. Shipments lagged take-aways in the third quarter (+17% vs. +29%), thus, Zuanic expects “fourth-quarter reported revenues to be above the 30% take-away figure.”

“That said, the break-even EBITDA target was pushed out by six months to mid-2022, as the company waits for automation equipment.”

Zuanic also noted that the stock trades at 1.5x the sales estimates for 2022, despite the company being the #4 player in Canada's recreational cannabis arena.

When compared to HEXO (NASDAQ:HEXO) (HEXO.TO), Zuanic argues that Auxly is in a much better position and has much better momentum. “Our Dec 2022 price target of C$0.49 conservatively takes 2.5x on our sales estimates for 2023. As the industry consolidates, XLY could be a beneficiary on both sides of the M&A equation,” Zuanic concluded.

Price Action:

Auxly’s stocks traded higher 2.38%, at C$0.22 per share, at the time of writing, Tuesday afternoon.

Image By Ilona Szentivanyi