Valens: Canaccord Lowers Price Target To $3.75

Earlier this month, The Valens Company (TSX: VLNS) reported their fiscal third-quarter financial results. The company reported net revenue of $20.99 million, up from the $18.76 million reported last quarter. Gross margins were 26.8% for the quarter compared to 22% last quarter, while adjusted EBITDA came in lower than last quarter at negative $6.18 million. The company reported a net loss of $12.8 million. Valens saw its SKU count go from 75 at the end of the first fiscal quarter to now 181 at the end of this quarter.

The Valens Company currently has 9 analysts covering the stock with an average 12-month price target of C$3.92, or 89% upside. Out of the 9 analysts, 1 has a strong buy rating, 7 have buys and 1 analyst has a hold rating. The street high sits at C$5.25 from Stifel-GMP, while the lowest comes in at C$2.50.

In a note, Canaccord Genuity lowered their price target to C$3.75 from $4.25 and speculative buy rating saying that after their first run-through the company is now focusing on margins. For the quarter, Canaccord forecasted revenue to be C$22.5 million.

Canaccord notes that this quarter included partial sales from Green Roads which accounted for C$4.7 million, so if you would back that out then sales would have declined by 12%. They write that this decline would be attributed to the company “transitioning away from smaller, underperforming B2B partners in favour of building deeper relationships with larger LPs.”

Onto gross margins, the company saw a 4.8% increase in gross margins, which can be partially attributed to the Green Roads inclusion. Canaccord writes, “Having now achieved critical mass for its SKU listings, VLNS plans to shift focus to driving margin expansion through automation, volume growth, and operational efficiencies.”

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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