In case no one saw this, check it out.....from AB's blog:
GrowLife: Time to Get Bullish Again
Posted on Feb. 3, 2014, 10:45 a.m. 1 comments
The call: It's time to get excited about the prospects for PHOT. I am raising my one-year target to $0.50
Please pardon me for keeping this way more sparse than I would like it to be. Sometimes the best arguments are the simplest.
Reasons for the opportunity
1.Confusion/concern over pending vote to raise authorized share-count to 3 billion
2.Slow dissemination of GIFT transaction info
3.A likely incorrect view that FITX is not a good partner and a failure to appreciate that PHOT isn't tied solely to CEN Biotech
4.Erroneous view that PHOT is just an equipment seller
PHOT is the real deal
PHOT has been pursuing its strategy for over a year, always playing close to the vest. It has attracted talent and capital and important partners, including a top-notch legal advisor. The market is skeptical about CEN Biotech, but I have learned that this is not an exclusive arrangement. Expect that PHOT will be very big in Canada over time. Also, the deal with RXNB (a minority stake) sounds very promising - this was out of the blue to the market and I am fairly sure that there is not a full appreciation for how this company will succeed. As it relates to FITX, I think that PHOT has structured the deal very smartly - mitigating risk in several regards while creating the potential for tremendous upside. PHOT will benefit from not only the initial equipment sales but from what could be years of expansion as the CEN Biotech project ramps up to capacity. I have said that even at 1/3 of its potential, this is a home-run for PHOT. PHOT is a partner of choice in my view - I saw this with my own eyes when I was in the FSPM factory in Denver (PHOT helps them finance their inventory prior to assembly). The company has a smart foot-print - it's no mistake that they were active in MA, and there will now be a big build-out as the new dispensaries and cultivation centers come on line.
The path to $0.50
I believe that PHOT and its partners will create value. While they aren't the only company in the sector that I see as having potential to escape from the OTC, their opportunity seems to be the largest. These guys are skating ahead of the puck, but they aren't showing their hand. In my view, if TRTC grows cannabis, PHOT will grow cannabis too, for instance. PHOT is one of the best ways to play what will be a very lucrative trend of larger and more efficient legal grow operations as more states expand both MMJ and legal MJ.
So, what is "$0.50"? First, it's not that far from where it touched last month - it should be able to grow into that valuation, which was simply premature. To execute its plan, we should expect the shares to go up to 2 billion outstanding over the next year roughly. The target I am setting, then, is $1 billion, similar to GWPH. Note that Medbox has that valuation now. The math of FSPM suggests an enterprise valuation of $1 billion right now. I am not one to suggest buying into the "greater fool" theory, but think about this: Besides GWPH, which stock is likely to attract institutional investment? OK, we already know that its PHOT (and CANN too). Cramer is on board the sector - which company would a guy like that "endorse"? What was the first company mentioned on TheStreet.com (does anyone think that this was just a coincidence?). PHOT has all the attributes we seek - integrity, strategy/vision, and relationships. The market cap is big enough for people to invest but not so big that it stands out as being one of the stupider valuations.
The CFA in me would love to give a complete model for sales and income, etc., but this isn't working . The parts are moving too fast and too much is not revealed to us. I want to give these guys the benefit of the doubt - they have earned it in my view. They announced GIFT, they funded it, and now they have started to create value with it. This is a gut call - everything is lining up.
What Now?
Having more confidence and a target at 61% higher than the close on 1/31 is not necessarily a reason to just buy the stock. These stocks are very volatile, and there is still a chance that PHOT could dip to the .225 or even .175 levels that I have been suggesting are possible. As I type this, I recognize that we are sitting just below big resistance. By the time this goes out, we may be through .32. To the extent one can buy that breakout, it makes sense in my view. The bottom-line is that PHOT is one of the best plays in the space. It makes a lot more sense at its current seemingly inflated valuation than many other lesser companies, and it has the potential to surprise us in my view with respect to creating value. Most importantly, at a time when scrutiny is likely to increase, PHOT is one of the few names that can draw in new and more sophisticated buyers, in my view. As always, I will try to share my short-term views on the stock, but the purpose of this call is to share more of a longer-term call.
