Village Farms Is Quietly Scaling A World Class Cannabis Business To Profitability

Earlier this month, Village Farms (NASDAQ: VFF) (TSX: VFF) traded more than 10% lower after it reported fourth quarter financial results for the period that ended on December 31st. 

Although the market responded negatively to the earnings report, Alliance Global Partners raised its price target on Village Farms to $26 from $24 (CAD). Prior to the earnings report, Raymond James Financial announced it had a Strong Buy rating and a $26 (CAD) price target on the Canadian cannabis company. These price targets are higher than what Cantor Fitzgerald issued the company. On Tuesday, the broker-dealer initiated coverage on Village Farms with a Hold rating and a $20 price target. 

In 2019, we visited Village Farm’s Canadian facility and were impressed with the size of the operation. At that time, the company still had a relationship with Emerald Health Therapeutics Inc. (EMH.V) (EMHTF) and the story has changed a lot since then. 

During the fourth quarter, Village Farms generated more than $47 million of revenue and recorded its ninth consecutive quarter of positive Adjusted EBITDA. Since inception, the company has been focused on being profitable and we are favorable on the trend as it is related to Adjusted EBITDA. 

Going forward, we expect Village Farms to record strong growth from Canada’s cannabis 2.0 market and are bullish on this vertical. The company plans to continue to roll out its first cannabis 2.0 products. After the quarter ended, Village Farms launched cannabis-infused gummies, its first edible product.  

In early March, Village Farms reported to have extended and amended its credit agreement with Bank of Montreal (BMO). The previous agreement had a February 2022 maturity date and the updated agreement has a February 2024 maturity date. We are favorable on how the updated agreement strengthens the balance sheet and expect it to play an important role in the growth of the business. 

The recent trend has been to the downside and we will continue to monitor price movements after the earnings report. If you are interested in learning more about the Canadian cannabis company, please send an email to support@technical420.com with the subject “Village Farms” to be added to our distribution list. 

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Michael Berger is Managing Partner of StoneBridge Partners LLC. SBP continues to drive market awareness for leading firms in the cannabis industry throughout the U.S. and abroad.

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