Raymond James: Villages Farms valued over $ 27 after full ownership of Sunfarms
Today, Raymond James analyst Rahul Sarugaser sent a note to investors on Village Farms (TSX: VFF) (NASDAQ: VFF), raising their 12-month price target to $ 14 from $ 11 and reiterating their Outperform 2 recommendation. The headline reads “4-5x Upside $ 5 to $ 17- $ 27 in PSF Acquisition Scenarios | Update the model.
Rahul says Village Farms has set itself up to acquire an even larger controlling stake, if not a 100% stake, in the Pure SunFarms joint venture of which it currently owns 58.7%. Therefore, Rahul has been proactive and modeled this hypothetical acquisition and states that Village Farm is buying up to 41.3% of the company, it would cost them between $ 25 and $ 300 million.
Raymond James claims that Pure SunFarms will capture “13% of the Canadian adult use market share through 2024” which is then stated “as a baseline scenario, which in turn drives a potential price tag. of the VFF share of $ 17.00 ”. Raymond James then assumes that with this 100% ownership of Pure SunFarms, Village will be more motivated to achieve its goal of 20% market share in the Canadian cannabis market, which in turn allows the share price to rise. Village to achieve a hypothetical $ 27 per share. .
There are a lot of moving parts in this hypothetical situation and for this reason Sarugaser made a matrix to justify the valuation estimates. The matrix shows Village’s estimated share price for each additional 10% they own for every additional $ 25 million of shares they issue to pay for the purchase of Pure SunFarms.
There are then three different columns to capture 13%, 16% and 20% of the Canadian cannabis market as a whole. Below you can see the hypothetical matrix. As you can see in Sarugaser’s model, if Village Farms has to pay more than $ 100 million for the additional 41.3% property, the hypothetical Village share price will go as low as $ 12 to $ 19 per. share, rather than their much higher $ 17-27.
There are currently six analyst recommendations and price targets on Village Farms. All six analysts have buy ratings. The 12-month average price target is CA $ 14.96, with the highest target coming from Douglas Cooper of Beacon Securities with a price target of CA $ 28, an increase of 328%. The lowest target price is CAD $ 8 for Eric Des Lauriers of Craig Hallum, which is a 23% increase.
Information for this briefing was found through Sedar and Refinitiv. The author has no title or affiliation related to this organization. Not a buy or sell recommendation. Always do additional research and consult a professional before purchasing a title. The author does not hold any license.