Harvest Health: Price Targets, Ratings after Q3 Earnings

Yesterday,  Harvest Health & Recreation (HRVSF) (HARV) reported its third-quarter earnings. For the quarter, the company had reported a revenue of $33.15 million, which was lower than analysts’ estimate of $34.18 million. Also, its net losses came in $39.1 million higher than analysts’ expectation of $31.56 million.

Despite its weak third-quarter performance, the company’s stock rose on Wednesday due to the strengthening of the cannabis sector. The sector benefited from the approval of the House Judiciary Committee for the legalization of cannabis at the federal level.

Yesterday, Harvest Health announced that it had terminated its previous agreement to acquire CannaPharmacy. Instead, the company would acquire only Franklin Labs, a subsidiary of CannaPharmacy, for $26 million. The transaction includes $15 million in cash and $11 million of promissory notes. Yesterday, Harvest Health’s stock increased by 6.7%.

Harvest Health: Price Targets, Ratings after Q3 Earnings

The latest price target for Harvest Health

After Harvest Health reported its third-quarter earnings, Cannacord Genuity lowered its price target from 19 Canadian dollars to 13 Canadian dollars. From the above graph, we can see a drop in analysts’ consensus price targets this month.

On November 20, analysts’ consensus price target stood at 16.22 Canadian dollars. This implies a decline of 20.2% from analysts’ consensus price target of 20.38 Canadian dollars on October 20. The new price target represents a 12-month return potential of 348.8%.

Among its peers, MedMen Enterprises (MMEN) (MMNFF), Curaleaf Holdings (CURLF) (CURA), and OrganiGram Holdings (OGI) traded at discounts of 229.9%, 95.0%, and 151.0%, from their respective price targets.

Analysts’ ratings for Harvest Health

There has been no rating change for Harvest Health after it reported its third-quarter earnings. On November 20, seven analysts followed the company. Of these analysts, three rated it as a “strong buy,” while four gave it a “buy” rating. None of the analysts recommended a “hold” or “sell” rating.

From the above graph, we can see that Harvest Health has received increased coverage in the last 12 months. In December 2019, only one analyst covered the stock.

Let’s look at analysts’ ratings for its peers:

  • Analysts favor a “hold” rating for MedMen. Of the eight analysts that follow the stock, six rated it as a “hold.”
  • Analysts favor a “buy” rating for Curaleaf. Seven of the eight analysts that cover the stock rated it as a “buy.”
  • Of the 16 analysts that follow Organigram, 14 gave it a “buy” rating. For more, please read Organigram: Target Price and Ratings before Q4 Earnings.

YTD stock performance

Despite yesterday’s rise, Harvest Health has lost 49.8% of its stock value this year through November 20. In our view, higher second-quarter losses and weakness in the cannabis sector led to a fall in the company’s stock price.

Among its peers, MedMen, Curaleaf, and Organigram returned -76.9%, 30.0%, and -32.2%, respectively, YTD. Curaleaf reported its third-quarter earnings after the market closed on November 19. For the quarter, the company reported revenues of $61.8 million, which fell short of analysts’ estimate of $63.6 million.

However, the company’s net EPS came in at -$0.01 per share versus analysts’ estimate of -$0.02. The reduced net losses led the company’s stock price to rise.

For more cannabis-related updates, please check 420 Investor Daily.