ROTH Capital Partners assumed coverage of Flora Growth Corporation (NASDAQ: FLGC) on Wednesday with a “buy” rating and are modeling shares to roughly double from current levels.
Analyst Scott Fortune argued in the note the cannabis company boasts among the lowest cost structures compared to its peers. This warrants a premium stock valuation of $10 per share, or 5.5 times 2023 estimated EV/Sales versus 3.3 times for MCOs and four times for LPs.
Flora Growth catalysts
Flora Growth’s cost advantage over other cultivators stems from its outdoor operations that are located in the favourable climate of Colombia. The Canadian firm produces quality cannabis at about six cents a gram – the lowest production cost globally.
Other reasons why ROTH analysts see upside in FLGC include a recent change in Colombian regulatory policy that now allows the export of dried cannabis flowers.
Naturally, global producers, particularly from Latin America and Europe are rushing to sign agreements to source from Flora Growth and leverage its low-cost infrastructure. This should translate to new and lucrative growth opportunities for FLGC.
On top of that, the company is committed to mergers and acquisitions to further expand its global market share. Its cannabis and derivatives could see high demand from pharmaceuticals, cosmetics, textiles, food and beverage and other CPG products.
‘First-mover advantage’
Flora Growth’s management team has “strong ties” to major CPG retailers and this could represent a first-mover advantage as more countries move to legalize cannabis consumption. Specifically, the company’s distribution infrastructure for non-THC products allows the company to sell branded, THC/CBD-infused CBD products.
Finally, recent regulatory changes in Columbia represent “signifcant” growth opportunities for Latin America and European cannabis exportation.
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