Research house M Partners has called The Valens Company (TSX:VLNS, OTCQX:VLNCF) Inc a “meaningful buying opportunity” at its current share price, according to a new note from the analyst group.
The vote of confidence comes following the release of its latest shareholder letter that provided the rationale for its recent $32 million financing.
In the letter, Valens CEO Tyler Robson and President Jeff Fallows said proceeds from the recent financing will enable it to manage working capital and cash cycles and give it financial flexibility as the company pursues its growth initiatives.
READ: Valens Company updates shareholders on financing rationale and integration initiatives as it continues on its path to profitability
The firm also unveiled a second wave of initiatives aimed at delivering additional operational and organizational efficiencies in the coming quarters as Valens “continues on its path to profitability”.
Shares of Valens have dropped off since February 2022, echoing the performance of its peers in the cannabis sector.
Despite this, M Partners is bullish on the stock with a $10 target price and a Buy rating. Valens is currently trading around C$1.63 in Toronto and US$1.32 in New York.
“We continue to view the large decline in VLNS shares as a meaningful buying opportunity as management works through this transitionary period,” M Partners wrote in a note.
The analyst firm highlighted the fact that the management team at Valens has not sold a single share over the last 12 months, and the recent financing had insider participation, which gives M Partners confidence in the company’s 2023 guidance.
“(W)e think that the various initiatives mentioned in the shareholder letter will be very strategic to VLNS’ long-term positioning in the sector and should begin to rebuild the management team’s reputation, increasing our confidence that VLNS can reach its 2023 guidance,” M Partners wrote, adding that it believes the outlook for 2022 and 2023 remains strong.
“Valens has seen solid progress with its brands thus far, where Valens ranked 10th in market share in February 2022, Verse BC God Bud was ranked the #1 best-selling SKU across Canada, and VLNS ranked 9th in market share on the OCS,” the group said. “We also believe the B2B segment is meaningfully de-risked following the new focus on the ‘fewer, bigger, better’ strategy.”
Contact Angela at angela@proactiveinvestors.com
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