The Valens Company (TSX:VLNS, OTCQX:VLNCF)’s 3Q 2022 results reported on October 12 show robust controls while growing recreational cannabis sales, according to Stifel GMP analysts, who have reiterated their ‘Buy’ rating on the stock.
In a note to clients, the analysts maintained their target price of C$1.20. Valens stock is currently trading at about C$0.90.
On Valens’ 3Q results, Stifel’s analysts wrote that the company reported robust cash flow improvement despite lower sequential consolidated sales, highlighting the brand’s impressive recreational cannabis sales growth of about 23% sequentially despite market disruptions.
READ: The Valens Company reports higher 3Q adjusted gross profit as integration initiatives kick in
They also noted the company’s achievement of its $15 million cost reduction target on selling, general, and administrative expenses alone this quarter with cash burn decreasing by 60% sequentially.
The analysts wrote that their positive stand on the company was supported by its exposure to the entire Canadian cannabis market, US hemp-derived CBD market and international opportunities, and its flexibility to produce every product format available, thereby maximizing its utility to brand partners/LPs.
They further noted that the company’s current valuation levels are too pessimistic, with shares trading below tangible book value, which offers investors an attractive risk-reward opportunity.
“Hence, we continue with our favorable outlook and believe investors should tender their shares as part of the SNDL takeover, maintaining our expectation of a January 2023 closing,” the analysts wrote.
The Valens Company is a leading manufacturer of cannabis derivative products with a mission to bring the benefits of cannabis to the world.
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