What Do Analysts Recommend for KushCo Holdings?

KushCo Holdings (KSHB) reported its first-quarter earnings on January 8 after the market closed. For the quarter, the company reported revenue of $34.96 million, which was below analysts’ expectation of $41.5 million. On a sequential basis, its revenue declined by 25.6% from $47.0 million in the fourth quarter of fiscal 2019.

KSHB’s management pointed to the vaping crisis and the subsequent ban in some US states for the decline in revenue. Despite weak sales, the company’s management reiterated its revenue and EBITDA guidance for fiscal 2020.

KSHB’s weak first-quarter sales led the company’s stock to fall to a low of $1.48 on January 9, before closing the day at $1.57. This represents a fall of 7.0% from its previous day’s closing price. Let’s look at analysts’ recommendations and opinions for KSHB stock.

There were no rating changes after KushCo Holdings reported its first-quarter earnings. Despite its weak first-quarter revenues, analysts continue to be bullish on KushCo Holdings. On January 9, nine analysts covered Kushco Holdings. Of these nine analysts, three gave it a “strong buy” rating, while six analysts gave it a “buy” rating. None of the analysts favor a “hold” or “sell” rating.

From the above graph, we can see that KSHB has received increased coverage since the beginning of 2019. In January 2019, only three analysts covered KSHB. However, the coverage has grown gradually to reach nine in January 2020. Let’s look at analysts’ recommendations for KSHB’s peers:

• Analysts are bullish on Cresco Labs (NYSE:CL), with all 11 analysts favoring a “buy” rating. For more on analysts’ opinions, read Why Beacon Securities Thinks Cresco Labs Is Cheap.
• Of the eight analysts that follow Curaleaf Holdings (OTCMKTS:CURLF), seven favor a “buy” rating, while one analyst gave it a “hold “rating. For more, read What Analysts Think About Curaleaf in Fiscal 2020.
• For Organigram Holdings (OGI), 12 of the 15 analysts gave it a “buy” rating, while three analysts are favored a “hold” rating.

From the above graph, we can see that there has been a gradual decline in analysts’ consensus price target since April 2019. On January 9, 2020, analysts’ consensus price target stood at $4.94, which represents a fall of 41.5% from $8.44 on April 9, 2019.

The new price target represents a 12-month return potential of 214.7%. There have been no changes in analysts’ price targets after KSHB reported its first-quarter earnings.

On January 9, KSHB’s peers Cresco Labs, Curaleaf Holdings, and Organigram Holdings were trading at discounts of 96.2%, 91.7%, and 144.3%, respectively, from their price targets.

The cannabis sector has been going through a rough period. Since the beginning of 2019, the ETFMG Alternative Harvest ETF (NYSE:MJ) has fallen by 32.9% as of January 9. During the same period, KushCo Holdings has lost 70.7%.

Concerns over vaping-related illness and fear of dilution appear to have led to a fall in KSHB’s stock price. From January 1, 2019, to January 9, 2020, Cresco Labs and Organigram have fallen by 17.8% and 43.6%, respectively. During this timeframe, Curaleaf stock has increased by 31.1%.

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