In this week's "Rising High," The Fly's recurring series focused on cannabis and psychedelic stock news, The Fly looks back on a deal termination, an acquisition and analyst views.
GROWGENERATION TERMINATES HGS HYDRO ACQUISITION: GrowGeneration (GRWG) announced Wednesday that the company and HGS Hydro mutually terminated the July 27 previously announced asset purchase agreement. The two companies will continue to work together to develop a mutually beneficial working relationship. "This was a difficult decision regarding the HGS Hydro acquisition, but following appropriate due diligence and capital allocation analysis, we decided to mutually terminate the acquisition," said Darren Lampert, GrowGeneration's CEO. "Importantly, our near-term objectives are to build and acquire garden centers in new markets that are growth opportunities for the company." The company also guided to Q3 revenue of $114M-$116M, which compares to analyst estimates of $123.06M, and Q4 revenue of $110M-$120M, which compares to a consensus of $132.66M. Additionally, GrowGeneration lowered its FY21 view to $440M-$452M from $455M-$475M, which compares to analyst estimates of $471.64M.
The company also announced its acquisition of All Seasons Gardening, an indoor-outdoor garden supply center specializing in hydroponics systems, lighting, and nutrients. With the acquisition of New Mexico-based All Seasons Gardening, GrowGen's portfolio of hydroponic garden centers now includes 63 stores across 13 states. As part of the transaction, All Seasons Gardening' team of nine employees will join GrowGeneration's team of over 500 grow professionals.
Following the news, Alliance Global Partners analyst Aaron Grey lowered the firm's price target on GrowGeneration to $45 from $55 and kept a Buy rating on the shares. The analyst noted the company pre-announced Q3 sales to be between $114M-$116M, which was below his and Street estimates, while also lowering its 2021 sales guide by 4% at the mid-point accounting for the canceled acquisition. With Q4 sales also guided to be roughly flat sequentially, the analyst pointed out that historical seasonality appears to have returned for the company's business, though he still believes GrowGeneration is well-positioned long-term, particularly as prospects for any notable changes to federal cannabis laws appear pushed out. Lake Street analyst Mark Smith also lowered the firm's price target on GrowGeneration to $50 from $63 and kept a Buy rating on the shares. He is lowering his estimates to adjust for the termination of the seven-store acquisition of HGS Hydro and to fit with management's guidance and pre-release, Smith noted. However, he thinks the long-term investment thesis is intact and views the pullback in the stock as "an attractive buying opportunity," Smith added.
CANOPY GROWTH PLANS TO ACQUIRE WANA BRANDS: Canopy Growth (CGC) announced Thursday the company and Mountain High Products, Wana Wellness, and The Cima Group, have entered into definitive agreements providing Canopy Growth with the right, upon federal permissibility of THC in the U.S., to acquire 100% of the outstanding membership interests of Wana, a cannabis edibles brand in North America. Wana manufactures and sells gummies in the U.S. state of Colorado and licenses its intellectual property to partners, who manufacture, distribute, and sell Wana-branded gummies across the U.S. in 12 U.S. states currently and across Canada. Wana expects to have license agreements in place in more than 20 U.S. states, including in future adult-use markets in New York and New Jersey, prior to the end of calendar 2022. The agreements are structured as three separate option agreements whereby Canopy Growth has a call option to acquire 100% of the membership interests in each Wana Entity. As consideration for entering into the agreements, Canopy Growth will make an upfront cash payment in the aggregate amount of $297.5M. Until such time as Canopy Growth exercises its right to acquire each Wana Entity, Canopy Growth will have no economic or voting interest in Wana, Canopy Growth will not control Wana, and the company and Wana will continue to operate independently.
STEM LAUNCHES BUDEE DELIVERY APP: Stem Holdings (STMH) announced Monday that Budee has launched the Budee Cannabis Delivery app, which is available for download in the Apple App store. Budee's 173,000 customers can purchase from its wide-ranging selection and track orders to their doorstep with an app-based shopping experience. The company said, “The Budee app improves the cannabis delivery customer experience by streamlining customer interactions into a single easy-to-use app interface. Additionally, customers installing Budee's app can take advantage of personalized, unique deals and discounts.”
FLORA GROWTH INITIATED WITH BUY: Roth Capital analyst Scott Fortune initiated coverage of Flora Growth (FLGC) on Wednesday with a Buy rating and $10 price target. The analyst believes Flora Growth is "uniquely positioned" as a leading low-cost producer of cannabis through its Colombian cultivation, with an emerging international medical cannabis opportunity after Colombia's recent decree to allow flower exports. Fortune thinks recent Colombian regulatory changes provide significant growth opportunities for Latin America/European cannabis exportation.
HIGH TIDE’S CANNA CABANA RECEIVES LICENSE: High Tide (HITI) announced Tuesday that its wholly-owned subsidiary, Canna Cabana, is now provincially licensed to operate in British Columbia, having received due diligence approval from the British Columbia Liquor Distribution Branch. With this approval in hand, Canna Cabana is now able to proceed with site-specific license applications.
OTHER CANNABIS/PSYCHEDELIC STOCKS: Other publicly-traded companies in the space include Acreage (ACRHF), Akerna (KERN), Aleafia (ALEAF), Atai Life Sciences (ATAI), Audacious (AUSAF), Aurora Cannabis (ACB), Ayr Wellness (AYRWF), BC Craft (CRFTF), Body and Mind (BMMJ), CanaFarma (CNFHF), RIV Capital (CNPOF), Clever Leaves (CLVR), Columbia Care (CCHWF), Compass Pathways (CMPS), CordovaCann (LVRLF), Cresco Labs (CRLBF), Cronos (CRON), CV Sciences (CVSI), Curaleaf (CURLF), CURE Pharmaceutical (CURR), Delic Holdings (DELCF), Delta 9 (DLTNF), Emerald Health (EMHTF), Fire & Flower (FFLWF), FluroTech (FLURF), Gage Growth (GAEGF), General Cannabis (CANN), Greenlane (GNLN), Green Thumb (GTBIF), Goodness Growth (GDNSF), Harborside (HBORF), Hemp (HEMP), Heritage Cannabis (HERTF), HEXO (HEXO), IM Cannabis (IMCC), India Globalization Capital (IGC), Indiva (NDVAF), Innovative Industrial Properties (IIPR), Inner Spirit (INSHF), InterCure (INCR), Khiron Life Sciences (KHRNF), Lowell Farms (LOWLF), Lotus Ventures (LTTSF), MediPharm Labs (MEDIF), MedMen Enterprises (MMNFF), MJardin Group (MJARF), Neptune Wellness (NEPT), Thermic Science (ENDO), Organigram (OGI), Planet 13 (PLNHF), Relmada Therapeutics (RLMD), RYAH Group (RYAHF), Skye Bioscience (SKYE), SLANG Worldwide (SLGWF), Sproutly (SRUTF), Sundial Growers (SNDL), Sunniva (SNNVF), TerrAscend (TRSSF), Tetra Bio-Pharma (TBPMF), Tilray (TLRY), Trulieve (TCNNF), Valens (VLNCF), Village Farms (VFF), WeedMD (WDDMF), Zynerba (ZYNE) and 4Front Ventures (FFNTF).
GrowGeneration
+0.18 (+0.86%)
Canopy Growth
+0.29 (+2.18%)
Stem Holdings
+
High Tide
+0.05 (+0.88%)
Flora Growth
+0.04 (+0.78%)
Aurora Cannabis
+0.1 (+1.40%)
CV Sciences
+
CannTrust
+
Cronos Group
+0.08 (+1.47%)
Trees Corporation
+
Goodness Growth
+ (+0.00%)
Green Thumb Industries
-0.0157 (-0.06%)
IGC Pharma
+ (+0.00%)
Tilray
+0.17 (+1.65%)
Trulieve Cannabis
-0.6 (-2.14%)
ZYNE
+
Atai Life Sciences
-0.01 (-0.08%)
Compass Pathways
+0.13 (+0.41%)
Relmada Therapeutics
+ (+0.00%)