Canaccord Reiterates $6.00 Price Target On Valens Company Following Investor Day
November 20, 2020 2:37 PM
By: Justin Young https://thedeepdive.ca/canaccord-reiterates-6-00-price-target-on-valens-company-following-investor-day/?fbclid=IwAR0pse85a7ri4Ud-8O3H8PHCUfa-rEHvWJor02b5PpsHEs-7aamFZBi6eLI
This morning, Canaccord Genuity released their takeaway from hosting their first virtual investor day with The Valens Company (TSX: VLNS). Matt Bottomley, Canaccord’s cannabis analyst, has a C$6 12-month price target and a speculative buy rating on Valens.
The first point Bottomley talks about is how throughout the presentation, management was quick to highlight “success and traction generated by their unique cannabis 2.0 custom manufacturing offerings.”
Bottomley talks to the next point that management believes that Canada is under-indexed in many of the 2.0 categories. Bottomley comments, “We believe that Valens is still best positioned to capture an outsized proportion of demand.” Valens shared data that in October, Valens partners accounted for roughly 17% of the vape sales on the OSC website and had many of the top vape brands in Alberta, Ontario, and British Columbia.
The next thing management talked about is that they guide their K2 facility, who’s approval has been delayed due to COVID, to be operational in early 2021. Due to the delays, Valens is currently operating at max capacity as it produces over 50 different products. Bottomley believes that once the K2 facility becomes operational, there will be “significant product launches and the opportunity for margin expansion as it reduces the number of touchpoints in the production process.”
During the investor day, Valens said that their next big opportunity is getting into the health and wellness category or cannabis 3.0. Management states that, “it allows the company to continue diversifying its product offerings and include formats such as bath bombs, soap bars, etc.” Bottomley says that management did not provide a timeline and is waiting for a more transparent regulatory picture before entering the US CBD / health & wellness market.
At the investor day, Valen’s Australian partner Cannvalate Pty Ltd CEO was there to speak on the Australian cannabis landscape. Dr. Sud Agarwal said there is a >4x upside on current patient levels and that the medical market is still in its infancy. The market is dominated by extracts offerings, which make up roughly 80% of the sales. Bottomley says that with “Cannavalate’s leading distribution infrastructure (accounting for 40%-to-50% of medical cannabis prescriptions in Australia), VLNS is positioned to make a meaningful entry into the Australian market.”