In a recently released analyst research report, Robert Fagan, CFA, a Healthcare Equity Research Analyst at GMP Securities, just initiated coverage of U.S. multistate operator iAnthus Capital Holdings, Inc. (CSE:IAN) (OTC:ITHUF) with a buy rating and a lofty price target.
Robert Fagan’s price target of $11 CAD per share, equivalent to $8.33 USD per share, implies a potential upside of approximately 53.84% based on the last traded price of $7.15 CAD on the CSE.
According to StreetInsider, Fagan based his positive view on three main points:
1. Evolution to larger-tier operator. The transformational MPX acquisition has allowed IAN to evolve into one of the US cannabis industry’s larger-tier players with a platform size now equivalent to the average of close peers GTII, HARV, CL and TRUL. We believe this argues for a valuation re-rating for IAN, whose current EV of ~$1b is ~50% smaller than its close peer group average of ~$2b.
2. Smart acquisition track record. IAN has demonstrated a smart track record of acquisitions with a total of 18 transactions, all at discounts of ~35%–40% to the average valuations of deals completed by peers. Management’s strong M&A pedigree should provide a sustainable competitive advantage in our view.
3. ~$3–7/share upside from REC conversions. With limited competition in NY, NJ and VT, we estimate IAN’s exposure to potential REC conversions in these states could translate into ~$120m-200m of added revenue and ~$3.00–7.00/share of upside to our target assuming market share capture of ~7%–10% in 2020.
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