WeedMD Inc's (CVE:WMD) second quarter solid revenue growth showed management's ability to execute on strategy, reckons broker Haywood Securities, which has repeated a 'buy' stance and target of C$3.25.
Yesterday, the firm posted revenue for the three months to end June of C$2.01mln, which was 83% up on the previous quarter to end March.
Revenue of C$3.2mln for the first half represented a whopping 1,271% increase compared to the first half of fiscal 2017.
"We believe that WeedMD is well-positioned for both the medical market and adult-use market in Canada," said Haywood analyst Neal Gilmer in a note.
"With close to $40M in cash and a fully funded expansion plan, the company is on track to significantly expand production by the end of this year.
"With various provincial supply agreements in place, as well as the recently announced agreement with Shopper's Drug Mart, it is our view that the company is positioned for solid growth in 2019," he added.
That said, the broker noted the company expects 'marginal' revenue growth in the third quarter, due to a suspension of wholesale product sales and seedling sales as it ramps up production at its Strathroy greenhouse in Ontario.
In late June initial crops were successfully moved into three grow rooms at Strathroy, or 25,000 sq ft.
Harvest of these rooms is on schedule for September this year, noted Gilmer, while the company expects a further 60,000 sq ft to be licensed and online during the fall of 2018 and the remaining 410,000 sq ft to be retrofitted and online by the end of the year.
"In addition, the company has signed supply agreements with Alberta, British Columbia, and Nova Scotia," said the analyst.
The broker noted that as with other pot stocks it covers, it has lowered the 2018 estimates due to the timing of the adult-use legalization.
Haywood values WeedMD based on a multiple of ten times EV/EBITDA (enterprise value/ EBITDA) on its 2020 estimates, discounted by 15% to bring to one year forward basis.
WeedMD shares in Toronto are up Wednesday 6.04% to C$1.93.