Raymond James: Village Farms Selloff Is Overdone

Village Farms International, Inc. (TSX: VFF) investors are having a rough start to the month, with the shares of the company slumping almost 27% after the company reported less than stellar earnings on May 10th. The company reported revenues of $52.4 million, up 63% year over year. This large increase comes from their acqusition of Pure Sunfarms which reported $17.5 million in revenue for the quarter.

Village currently has 6 analysts covering the company with a weighted 12-month price target of C$23.47. This is slightly down from the average before the results, which was C$24.81. One analyst has a strong buy rating and the other four have buy ratings. The street high comes from Raymond James with a C$32.84 price target, while Craig Hallum has the lowest at C$16.

Raymond James reiterated their strong-buy rating and $24.81 price target on Village Farms and calls the bottom for its sliding share price. Rahul Sarugaser writes, “We see this selloff as overdone. VFF’s drivers of value creation remain strong.”

Village beat Raymond James’ revenue estimate of $50.9 million but EBITDA missed their $2.5 million estimates. One of the primary points Sarugaser points to is that it has recently been shown that LP to LP and Government purchases have slowed down but Pure Sunfarms’ revenue didn’t bludge. Cannabis revenue came in flat for the quarter but the product mix shifted to comprise of ~84% branded retail sales and only 16% wholesale, versus 69% and 31% respectively when compared to the prior quarter.

Pure Sunfarms’ growing branded sales over 20% quarter over quarter is great Sarugaser says, specifically because during the same period the Canadian adult-use sales dropped 11%. He writes, “This strong performance amid a challenging market backdrop is revealed in PSF’s rapid capture of Canadian adult-use market share.” He says that Pure Sunfarms now has the #3 market share behind Tilray and Canopy Growth.

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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