The Analyst
Pablo Zuanic, an analyst with Cantor Fitzgerald, qualified Fire And Flower (FAF) (NYSE:FAF) (OTC:FFLWD) as Overweight and lowered its price target to C$10.40 from C$13.
The Thesis
In his analyst note, Zuanic argued that Canadian retailers “are in for a rough year ahead as more stores open and some chains opt for blanket discounting. That said, we are more comfortable with Fire and Flower's asset-light business model and technology-driven tactical approach to price adjustments.”
"The Tech Vision Should Drive Growth"
With the acquisition of Pineapple Express Delivery (an e-commerce delivery service in Canada), management expects to deliver a full suite of tech solutions (including the recent acquisitions of pot-guide and Wikileaf).
Zuanic noted that Pineapple Express is the industry leader in Canada, with 40,000 deliveries per month and that as boards ease rules, the company's delivery will become a bigger part of the retail chain's strategy.
Outlook
Management expects a challenging January quarter due to disruptive changes at retail (more stores, blanket discounting by some retailers), and implied (in Zuanic’s view) “a drop in retail gross margins to the mid/high 20 percent range from 30.3% in the October quarter.”
Highlights Of The Third Quarter
37% YoY Revenue Increase
Fire & Flower Holdings Corp. announced its financial and operational results on Tuesday for the fiscal third quarter ended October 30, 2021. The Toronto-based company reported a 37% year-over-year improvement in revenue and sixth consecutive quarter of positive adjusted EBITDA. The company also bolstered the Circle K co-location program to expand its retail footprint.
Price Action
FAF traded lower 3.61% at C$ 5.61 per share, at the time of writing, Wednesday noon.
Photo Courtesy of Lelen Ruete
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