GAGE Cannabis: PI Financial Reiterates Their Street High Target, Lowers 2021 Estimates

On August 24, Gage Growth Corp. (CSE: GAGE) announced their second quarter financial results. The company announced revenue grew 50% sequentially to $26.41 million, while gross profit grew 81% to $9 million for a gross profit margin of 34.2%. The company also reported a negative operating margin of 22.7% and a negative net income of $9.7 million. Adjusted EBITDA came in at a negative $1.9 million.

Gage only has 4 analysts covering the stock with a weighted 12-month price target of $5.63, or a 130% upside. The street high target sits at $7.50 from PI Financial while the lowest comes in at $4.50 from Haywood Securities. Out of the 4 analysts, 2 have strong buys and the other 2 have buy ratings.

PI Financial, in their note sent out on August 25, reiterated their buy rating and $7.50 12-month price target saying that their going thesis remains intact but calls the results neutral as revenue missed both PI Financials estimate ($28.5 million) and the street’s estimate ($31.6 million.) Management noted that it was due to store openings being delayed.

PI Financial says, “GAGE is continuing to execute on their retail expansion strategy in Michigan, validating their retail model with strong average sales per dispensary and the ability to command premium pricing in Michigan.” Although store openings have been slow during the first half of 2021, they believe this just means that the second half of 2021 will see a strong pipeline of store openings.

The company has guided for 20 store openings in Michigan by year-end, with them having 10 stores opened right now but PI Financial is forecasting for 16 stores to be open, which is below management’s guidance. They believe by the end of 2022 they will have open 27 dispensaries. Because of this, they have lowered their 2021 and 2022 estimates.

2021 Revenue is now expected to come in at $116 million ($141 million prior), with EBITDA of $6 million ($9 million prior). And for 2022, the revenue estimate is now $310 million ($306 million prior) and $88.4 million in EBITDA ($93 million prior).

Information for this briefing was found via Sedar and Refinitiv. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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