Amidst the current spotlight on the cannabis industry due to increasing acceptance of marijuana for medical and recreational use globally, Village Farms International (NASDAQ:VFF) emerges as a standout performer, boasting a remarkable 67% year-to-date surge and the potential for another 31% rally, according to analysts.
The cannabis landscape has seen significant shifts, with notable legislative proposals such as Germany’s recent vote to partially legalize cannabis for personal use, opening doors to new market opportunities and expansion. In the United States, investors eagerly anticipate updates on the proposed rescheduling of marijuana, which could greatly benefit multi-state operators.
In this thriving environment, some cannabis stocks have soared in 2024. Yet, one company that may not have caught your attention yet is Village Farms International (NASDAQ:VFF). This company stands out not only as a player in the cannabis industry but also as a diversified portfolio encompassing North American cannabis and hemp growers and distributors, with additional exposure to agriculture and alternative energy. Moreover, Village Farms’ venture into the German market holds promising potential following parliament’s landmark decision on cannabis legalization.
Despite flying under the radar, Village Farms International (NASDAQ: VFF) has garnered bullish sentiments from analysts who believe the stock is poised for further upside. But what exactly fuels this optimism surrounding Village Farms stock? Let’s delve deeper to find out.
About Village Farms International Stock
Village Farms International (NASDAQ:VFF) is not just a cannabis company; it is a true green thumb in the agricultural sector. With a diverse portfolio spanning fresh greenhouse-grown produce, cannabis, hemp, and alternative energy derived from landfill gas, Village Farms cultivates a multi-faceted business model flourishing across North America and select international markets.
Over the past year, VFF’s stock price has outperformed the S&P 500 Index ($SPX) by a substantial margin, soaring 55% during this period. Most of this surge occurred within the last month, with VFF more than doubling from its March 13 low of $0.58.
However, despite its impressive performance, VFF has experienced significant pullbacks, down approximately 94% from its all-time highs set in 2021. Nevertheless, as of today, the company is compliant with Nasdaq share price listing standards.
The recent positive momentum stemmed from VFF’s Q4 earnings report, where despite reporting a wider-than-expected per-share loss, the company exceeded Wall Street’s revenue consensus. Consolidated sales surged by 7% year-over-year to $74.2 million, surpassing analysts’ forecasts by over $3 million. Additionally, although the net loss widened year-over-year, it improved to $22.5 million, or $0.20 per share, compared to the previous year’s $49.3 million, or $0.54 per share.
Moreover, VFF’s cash flow situation, while showing increased cash usage, was addressed by management during the earnings call. Ending Q4 with $35.3 million in cash and $79.6 million in working capital, along with $13 million in net debt – a level deemed comfortable by CFO Stephen Ruffini.
Looking ahead, analysts anticipate VFF to narrow its full-year loss to $0.06 per share in fiscal 2024.
What’s Driving Growth at VFF?
One significant development expected to drive incremental cash flow is the recent commencement of operations at the Delta Renewable Natural Gas (RNG) production facility in British Columbia. This partnership between Atlanta’s Terreva Renewables and Village Farms Clean Energy (VFCE) subsidiary is pivotal in transitioning the wholly owned VFF subsidiary towards a more sustainable business model while bolstering profitability and cash flow.
However, VFF’s ambitions extend beyond clean energy. The company is making strides in Europe with the construction of its first indoor cannabis production facility in Drachten, Netherlands. This move is significant as VFF, through its majority-owned subsidiary Leli Holland, is one of only 10 licensees authorized to legally produce and distribute recreational cannabis in the Netherlands. With production slated to commence in the fourth quarter of 2024, VFF is poised to meet the Dutch demand for cannabis products, including flowers, hash, and popular consumer favorites like pre-rolls. Funding for the facility’s construction is sourced from cash on hand, affirming VFF’s commitment to reinvesting earnings into expansion.
Expanding into the UK market, VFF made headlines with the shipment and launch of two leading cannabis brands, Pure Sunfarms, and The Original Fraser Valley Weed Co., known as Fraser Valley. These brands are now available to UK consumers through a distribution partnership with 4C LABS, a UK-based medical cannabis company focused on providing high-quality products to patients. This venture marks VFF’s entry into its fourth overseas medical market.
While coverage of Village Farms by analysts has been limited, those who have weighed in are overwhelmingly optimistic about VFF’s prospects. All three analysts covering the stock have given it a “strong-buy” rating, with a mean target price of $1.68, representing a potential upside of 31.7% from current levels.
Conclusion
With the cannabis sector experiencing rapid growth, Village Farms International stands out as a strategic player, expanding its footprint across North America and Europe. With ambitious growth plans and a focus on cash flow generation, VFF presents a compelling opportunity for investors willing to embrace the higher risk associated with potentially higher rewards. Keep a close eye on this under-the-radar gem as it continues to carve its niche in the cannabis industry.
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