logo-loader

The Valens Company receives ‘positive’ buy rating from Stifel following two acquisitions

Published: 11:43 02 Sep 2021 EDT

The Valens Company - The Valens Company receives ‘POSITIVE’ rating from Stifel following two acquisitions
Shares of Valens were trading at C$2.96 on Thursday morning

Stifel GMP has issued a "positive" buy rating and target price of $5.75 on The Valens Company (TSX:VLNS, OTCQX:VLNCF) a day after the cannabis manufacturer announced the completion of its acquisition of Verse Cannabis.

The deal for the Canadian cannabis retailer will see Valens take ownership of all of the Verse intellectual property. Just a few weeks earlier Valens also reported that it was purchasing Citizen Stash Cannabis Corp, a Canadian premium craft cannabis company, in an all-stock transaction valued at about C$54.3 million. Both deals were cited in the analyst coverage from Stifel.

“With these two transactions, VLNS captures the Verse royalty payment, reduces execution risk and provides for greater control over brand positioning at both extreme price segments in the industry, potentially balancing margin profiles,” Stifel analysts said in their note. 

READ: The Valens Company acquires Verse Cannabis and all its intellectual property

They continued: “While it may seem at first glance a departure from the company's previous focus of being solely a manufacturing partner to brand houses/other LPs, we believe the reality is more nuanced. In our view, VLNS can leverage its position as a large-scale flower wholesale buyer and established low-cost, high-quality manufacturing infrastructure to negotiate synergistic supply contracts/RFPs for win-win scenarios.”

Verse Cannabis, which prior to the deal, was Valens' largest brand partner, is positioned in the value segment with a line of flower, pre-rolls, concentrates, edibles, beverages, and vapes. Citizen Stash is credited with bringing upstream IP positioning through strong genetics and pheno-hunting capabilities (R&D) to Valens.

By acquiring Verse and Citizen Stash, Valens is garnering, “greater control over the company's long-term major revenue drivers, in our view, with management utilizing accretive transactions to reduce execution risk,” the analysts pointed out.

This provides for not only a sustainable competitive advantage, but also long-term differentiation exemplified by the few strongest brands in the cannabis world today, they added.

“Our $5.75 target price is based on applying a 4.5x multiple on our FY2022e sales estimate,” the analysts noted. Shares of Valens were trading far C$2.96 on Thursday, September 2. 

Contact the writer at georgia@proactiveinvestors.com

Follow her on Twitter @MissInformd

Australian Strategic Materials signs US$600 million LoI

Rowena Smith, CEO and managing director of Australian Strategic Materials Ltd (ASX:ASM, OTC:ASMMF), joins Jonathan Jackson in the Proactive studio to discuss the company’ s Dubbo Project, in Central West New South Wales. This project aims to extract and process critical minerals and rare earth...

5 hours, 36 minutes ago