Supreme Cannabis: Lower Target Price after Q1 Earnings


Dec. 11 2019, Updated 1:19 p.m. ET

As of Tuesday, Supreme Cannabis (FIRE) (SPRWF) was trading at 0.65 Canadian dollars—a fall of 13.3% since it reported its earnings for the first quarter of fiscal 2020 on November 14. For the quarter, the company’s revenues were 11.43 million Canadian dollars, which fell short of analysts’ expectations by 44.5%. The company’s net loss was 16.5 million Canadian dollars—significantly higher than analysts’ estimate of a loss of 0.58 million Canadian dollars. The lower-than-expected first-quarter performance and weakness in the cannabis sector caused Supreme Cannabis’s stock price to fall. Now, let’s look at analysts’ recommendations for the stock.

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Analysts cut Supreme Cannabis’s target price

Following Supreme Cannabis’s weak first-quarter performance, PI Financial and Canaccord Genuity lowered their target prices. On November 16, PI Financial cut its target price by 25% to 1.50 Canadian dollars. On November 18, Canaccord Genuity lowered its target price from 1.60 Canadian dollars to 1.30 Canadian dollars. As of Tuesday, analysts’ consensus target price was 1.23 Canadian dollars, which implies a return potential of 88.5%. In the above graph, you can see that analysts’ consensus target price has fallen since September, which indicates a decline in analysts’ sentiments.

On the same day, Cresco Labs (CRLBF) (CL), Charlotte’s Web Holdings (CWEB) (CWBHF), and Curaleaf Holdings (CURLF) were trading at a discount of 123%, 83.7%, and 101.5% from their respective target prices.

Analyst’s opinion

As reported by Cantech Letter, Robert Fagan of GMP Securities is bullish on Supreme Cannabis. He has a “buy” rating on the stock with a target price of 1.75 Canadian dollars. On December 5, Supreme Cannabis announced that it would produce vape pods at its Blissco facility in partnership with Pax Labs. Fagan thinks that the company’s decision to produce cannabis-derived products inhouse could provide greater control over its production and improve its margins.

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Analysts’ recommendations for Supreme Cannabis

There haven’t been any rating changes since Supreme Cannabis reported its first-quarter earnings. As of Tuesday, two of the eight analysts recommended a “strong-buy” rating, while four recommended a “hold” rating. Among the remaining two analysts, one recommended a “hold,” while the other recommended a “sell.” In the above graph, you can see that more analysts have started covering Supreme Cannabis in the last 12 months. In December 2018, only five analysts covered the stock.

Let’s look at analysts’ rating for Supreme Cannabis’s peers:

YTD stock performance

So far, 2019 has been tough for Supreme Cannabis. The company has lost 50.8% of its stock value YTD as of Tuesday. Supreme Cannabis has underperformed compared to its peers and the broader equity markets. During the same period, Cresco Labs and Charlotte’s Web have lost 19.9% and 24.1% of their stock values, respectively.

Meanwhile, Curaleaf stock has increased 22.4% during the same period. The company’s impressive third-quarter performance and its recent acquisition of Select and Grassroots Cannabis led to a rise in the stock price.

Visit 420 Investor Daily for more cannabis-related news.


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