In an Oct. 27 research note, Noble Capital Markets analyst Joe Gomes
reported that Stem Holdings Inc. dba Driven By Stem (STEM:CSE; STMH:OTCQX) agreed to acquire Colorado Harvest Co., a cannabis retailer of edibles, concentrates, and naturally grown flower. The deal terms are still being negotiated.
"Noble has an Outperform rating and $2 per share target price on Stem Holdings."
Gomes described Colorado Harvest and how it will enhance Stem Holdings.
Colorado Harvest operates two dispensaries, one in Denver, the other in Aurora, as well as a pair of cultivation facilities producing 200-plus pounds of cannabis monthly. The company also has two delivery permits.
This year, Colorado Harvest is expected to generate $13 million ($13M) of revenue, for $5.07M of gross profit.
Given Colorado Harvest's array of verticals, the acquisition will benefit Stem Holdings in various ways. For one, Stem will gain access to the second largest legal cannabis market in the U.S.: Colorado. There, total 2021 cannabis sales are estimated to be $2.5 billion ($2.5B), up from $2.2B last year.
Two is access to a fragmented market, 22% of which is held by the top players. As the market consolidates, it will offer "significant growth opportunity."
Three, because home delivery is new to the Colorado market, Stem will be able to implement its Budee home delivery service in a new market. Further, the market is concentrated as half of all sales in Colorado occur in Denver and its three surrounding counties.
Four, Gomes noted, "Colorado Harvest also adds additional proprietary, award-winning strains and products to Driven by Stem's quiver."
Noble has an Outperform rating and $2 per share target price on Stem Holdings, the current share price of which is about $0.26 at the time of publication.
Disclosures:
1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: Stem Holdings Inc. dba Driven By Stem. Click here for important disclosures about sponsor fees. As of the date of this article, an affiliate of Streetwise Reports has a consulting relationship with Stem Holdings Inc. dba Driven By Stem. Please click here for more information.
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Disclosures for Noble, Stem, Oct. 27, 2021
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