Cannara Biotech: An Undervalued Growth Opportunity that is Flying Under the Radar

A few months ago, we published an article on Cannara Biotech Inc. (TSX Venture: LOVE) (OTCQB: LOVFF) (FRA: 8CB), a vertically integrated Canadian Licensed Producer (LP) with more than 1.6 million square feet of production capacity.  After the Canadian LP reported earnings, we wanted to issue a follow up article on the business and want to our readers to be aware of the advancement of the company.

So far this year, Cannara Biotech has been nothing short of an execution story and we believe the business is positioned to record strong growth in 2023 and beyond. Currently, the Canadian LP is selling cannabis in Ontario and in Quebec (which are 2 of the 4 largest Canadian provincial markets) and is also selling in Saskatchewan and British Columbia (BC).

During the last quarter, we have highlighted Cannara Biotech as a Canadian cannabis company that is flying under the radar. Following the recent earnings report, we find it impossible to ignore the business and have highlighted 5 key takeaways from it.

1. When compared to fiscal year 2021, Cannara Biotech recorded a more than 100% increase in revenue in fiscal year 2022. We consider the increase to be substantial and believe our reader should be aware of the performance
2. Going forward, we believe Cannara Biotech is well position to record incremental growth. As of August 31^st, the management team has been able to successfully redesign and activate 6 additional grow zones in the Valleyfield facility. The new zones have already produced 6 harvests and we are bullish on this aspect of the story. Currently, the company is cultivating in 6 of the 25 zones (each zone is 25,000 sq. ft.) and we are favorable on the opportunity to increase production.
3. During the quarter, Cannara Biotech reported its sixth straight quarter of positive adjusted EBITDA, generated C$12 million of revenue, and recorded C$4.8 million of gross profit before fair value adjustments. When compared to the prior quarter, the company recorded strong growth and we expect the trend to continue
4. When compared to the first half of fiscal year 2022, the business recorded huge growth in the second half of the fiscal year. During the second half of the year fiscal year, the amount of kilograms sold increased by 69% and the increase can be attributed to the amount of production from the Valleyfield facility
5. As of August 31^st, Cannara Biotech had more than C$12 million of cash on hand, C$29 million of working capital, and more than $13 million of inventory. Based on these numbers, we find the valuation to be attractive and believe the market is incorrectly valuing the business.

A Rapid Growth Story With Catalysts For Growth

We are of the opinion that Cannara is one of the most misunderstood cannabis operators in North America. At current levels, we find Cannara’s valuation to be attractive and believe the risk-reward profile is one of the most attractive in the entire cannabis sector. With a production footprint that could be greater than 1.6 million square feet, the company can scale the business as needed and capture additional market share in Canada.

We consider Cannara Biotech to be a company with catalysts for growth and believe our readers need to be aware of this. Over the next year, we expect the company to increase production capacity, to bring additional premium cannabis products to market, and to execute on core growth initiatives.

If you are interested in learning more about Cannara Biotech, please send an email to support@technical420.com with the subject “Cannara Biotech” to be added to our distribution list.

Company Relationship Disclosure

T420 is responsible for the T420 opinions provided in this disclosure except all sources or information provided by other parties were not verified or authenticated and T420 does not undertake to confirm or substantiate or be responsible for such information provided by other parties.

Any Content posted regarding a Profiled Issuer is not a solicitation or recommendation to buy, sell or hold securities. We cannot and do not assess, verify or guarantee the adequacy, accuracy or completeness of any information, the suitability or profitability of any particular investment, or the potential value of any investment or informational source. All information should be independently verified. We are not responsible for errors or omissions in our publications, and any opinions expressed are subject to change, without notice. We do not, nor are we under any obligation to undertake due diligence or investigation or authenticate and verify whatsoever regarding Profiled Issuers or any Content posted in relation thereto and we do not receive any verification from the Profiled Issuer regarding the Content we disseminate. Similarly, while we endeavor to facilitate the provision of quality information, we are not responsible for any loss or damages caused or alleged to have been caused by its use nor verify or authenticate or update such information.

Pursuant to an agreement between StoneBridge Partners LLC and Cannara Biotech (LOVE) we have been hired for a period of 90 days beginning October 1, 2022 and ending January 1, 2023 to publicly disseminate information about Cannara Biotech including on the Website and other media including Facebook and Twitter. We are being paid $3,000 per month by Cannara Biotech and were paid “ZERO” shares of unrestricted or restricted common shares. We plan to sell the “ZERO” shares of Cannara Biotech that we hold during the time the Website and/or Facebook and Twitter Information recommends that investors or visitors to the website purchase without further notice to you. We may buy or sell additional shares of Cannara Biotech in the open market at any time, including before, during or after the Website and Information, provide public dissemination of favorable Information.

This article contains forward-looking statements within the meaning of applicable securities laws. All statements that are not historical facts, including without limitation, statements regarding future estimates, plans, programs, forecasts, projections, objectives, assumptions, expectations or beliefs regarding future performance are “forward-looking statements”. Forward-looking statements can be identified by the use of words such as “expects”, “does not expect”, “is expected”, “believes”, “intends”, “anticipates”, “does not anticipate”, “believes” or variations of these words, expressions or statements, that certain actions, events or results “may”, “could”, “would”, “might” or “will be” taken, will occur or will be realized. Such forward-looking statements involve risks, uncertainties and other known and unknown factors that could cause actual results, events or developments to differ materially from the results, events or developments expected and expressed or implied in such forward-looking statements. These risks and uncertainties include, but are not limited to, dependence on obtaining and maintaining regulatory approvals, including the acquisition and renewal of federal, provincial, state, municipal, local or other licenses, and any inability to obtain all necessary government authorizations, licenses and permits to operate and expand the Company’s facilities; regulatory or policy changes such as changes in applicable laws and regulations, including federal, state and provincial legalization, due to fluctuations in public opinion, industry perception of integrative mental health, including the use of psychedelic-assisted therapy, delays or inefficiencies or any other reason; any other factor or development likely to hamper the growth of the market; the Company’s limited operating and profitability track record; dependence on management; the Company’s need for additional financing and the effects of financial market conditions and other factors on the availability of capital; competition, including that of more established and better funded competitors; the impact of the Russia-Ukraine conflict on the global economy; the continued impact of the COVID-19 pandemic; and the need to build and maintain alliances and partnerships, including with research and development companies, customers and suppliers. These factors should be carefully considered, and readers are cautioned not to place undue reliance on forward-looking statements. Despite the Company’s efforts to identify the main risk factors that could cause actual measures, events or results to differ materially from those described in forward-looking statements, other risk factors may cause measures, events or developments to materially differ from those anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in forward-looking statements. The Company does not undertake to revise forward-looking statements, even if new information becomes available as a result of future events, new facts or any other reason, except as required by applicable laws.

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Michael Berger is Managing Partner of StoneBridge Partners, LLC and Founder of Technical420.com. Prior to entering the cannabis industry, Michael was an Equity Research Analyst at Raymond James Financial covering the Energy Sector. Michael has been featured in publications such as The Street, Bloomberg, US Money News, and hosts various cannabis events across North America.

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