Goodfood: Canaccord Raises Price Target To $11.50 Ahead Of Earnings

This morning, Canaccord Genuity raised their 12-month price target to C$11.50 from C$9.50 and reiterated its buy rating on Goodfood Market (TSX: FOOD) ahead of its fourth-quarter earnings results. Goodfood is scheduled to report its earnings results on November 11th before the market open.

Canaccord currently forecasts revenue of $70 million, or up 54% year over year, which is below the streets estimate of $75 million. Additionally, they are forecasting EBITDA to come in at $0.7 million, which is curiously above the streets estimate of ($0.04) million. Analyst Luke Hannan expects gross merchandise sales to come in at $81 million, a 45% increase year over year.

Goodfoods previously announced that they had added 8 thousand net new subscribers in the fourth quarter ending the period with 280,000 subscribers. This is a 40% increase from a year ago. Luke Hannan comments on this, stating, “The number of net new adds indicates, in our view, that the effect of seasonality was still present in Q4/F20, with potential new subscribers opting to defer subscribing during the summer months.”

Hannan also anticipates that their gross margin will expand since, in the third quarter, the company had a one-time food and production cost, which was roughly $2 million. He says, “We believe that, while food cost inflation, labour, and elevated packaging expenses during the summer months will weigh on margins to a certain extent, the absence of non-recurring costs, particularly the company’s Essential Canadian Pay Program, will result in healthy margin recovery from Q3/F20.”

Finally, Hannan addresses that marketing expenses were reduced heavily in the fourth quarter of 2020. The expense is said to make up between 55% to 65% of all SG&A costs. Canaccord as a result is forecasting SG&A as a percentage of net revenue to amount to 24.4%, down 5% from the previous year. Hannan currently forecasts adjusted gross margin to be 39.2%, up 1% from the third quarter.

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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