As of Thursday, Supreme Cannabis (NASDAQ:FIRE) was trading at 0.29 Canadian dollars—a fall of 28.4% since the announcement of its second-quarter earnings for fiscal 2020 on February 13. For the quarter, the company reported revenues of 9.1 million Canadian dollars. The EBITDA was at -10.44 million Canadian dollars. Supreme Cannabis missed analysts’ revenue and EBITDA expectations during the quarter. Management withdrew its previous guidance for fiscal 2020 due to a slower-than-expected rollout of retail stores across the country. The weak second-quarter performance and withdrawal of its fiscal 2020 guidance dragged the stock down. Let’s look at analysts’ recommendations for the stock.
Analysts cut their target prices for Supreme Cannabis
Since Supreme Cannabis reported its second-quarter earnings, Eight Capital, PI Financial, Canaccord Genuity, and CIBC lowered their target prices.
- Eight Capital cut its target price from 1.25 Canadian dollars to 0.75 Canadian dollars.
- PI Financial lowered its target price from 1.5 Canadian dollars to 0.90 Canadian dollars.
- Canaccord Genuity cut its target price from 1.30 Canadian dollars to 1.00 Canadian dollars
- CIBC lowered its target price from 0.65 Canadian dollars to 0.50 Canadian dollars
As of Thursday, analysts’ consensus target price was 0.62 Canadian dollars—a fall of 43.6% from 1.1 Canadian dollars on February 5. The new target price represents a 12-month return potential of 113.4%. From the above graph, you can see that analysts’ consensus target price has seen downward momentum since Septemeber 2019.
Meanwhile, Cresco Labs (OTCMKTS:CRLBF), Charlotte’s Web Holdings (NYSEARCA:CWEB), and Curaleaf Holdings (OTCMKTS:CURLF) are trading at discounts of 176.6%, 129.1%, and 137.6% from their respective price targets.
Wall Street favors a “hold” rating for Supreme Cannabis. Among the eight analysts, four recommend a “hold,” three recommend a “buy,” and one recommends a “sell.” After Supreme Cannabis reported its second-quarter earnings, Robert Fagan of Stifel GMP downgraded the stock from “buy” to “hold.” He also lowered his target price from 1.75 Canadian dollars to 0.50 Canadian dollars.
As reported by Cantech Letter, Fagan stated that the company’s wholesale sales fell from 54% of the total sales in the previous quarter to 38% in the second quarter. The fall indicates the company’s intent to move towards the recreational cannabis business. However, Fagan thinks that slower retail penetration in Alberta and British Columbia and less reordering in Ontario slowed down the transition. Management withdrew the guidance for 2020, which reduced the visibility on the company’s transition path towards the recreational market. Fagan has lowered his fiscal 2020 sales guidance to 47.2 million Canadian dollars from his earlier estimates of 100.8 million Canadian dollars. Fagan also reduced his EBITDA expectations from 6.7 million Canadian dollars to -21.7 million Canadian dollars.
Let’s look at analysts’ recommendations for Supreme Cannabis’s peers:
- Wall Street favors a “buy” rating for Cresco Labs. All of the 13 analysts that follow the stock recommend a “buy.”
- Among the ten analysts that follow Charlotte’s Web Holdings, eight recommend a “buy,” while two recommend a “hold.” On Wednesday, Charlotte’s Web reported the results from its 2019 hemp harvest audit. To learn more, read Charlotte’s Web Reports Improved Yield and CBD Potency.
- For Curaleaf, eight of the nine analysts recommend a “buy,” while one recommends a “hold.”