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Stone Fox Capital Advisors is a registered investment advisor founded in 2010. The firm offers portfolio management with a focus on opportunistic stocks providing secular growth trends at an affordable value. An emphasis is placed on fundamental analysis though charts are used for timing entry and exit points. Mark Holder graduated from the University of Tulsa with a double major in accounting & finance. Mark has his Series 65 and is also a CPA. Invest with Stone Fox Capital's model Net Payout Yields portfolio on IB Asset Management as he makes real time trades. The site allows followers to duplicate the model portfolio in their own brokerage accounts. You can find the portfolio and more details here: Follow Mark on twitter: @stonefoxcapital

Cannabis Stock Health & Recreation (HRVSF) Is Very Appealing Based on Long-Term Bullish Fundamentals

Harvest Health & Recreation (HRVSF) finally reported Q4 results for the period ending December. The numbers were impressive, but investors will be misled when looking at the pure size of the numbers. The company is on the precipitous of becoming a global cannabis leader due to the size of the U.S. market and the acquisitions in the pipeline.

Focus on Deals in the Works

For Q4, Harvest Health reported revenues grew 52% over the Q3 numbers to $16.9 million. Even better, the cannabis company reported adjusted EBITDA remained positive at $2.6 million for the quarter and topped $10.0 million for the year.

Being that the calendar is already near the end of April, these quarterly numbers aren’t entirely useful. Harvest Health has so many deals in the pipeline since last November that aren’t even included in these results.

Harvest Health bought CBx Enterprises last November to provide a brand offering from Colorado. Sal Felasco Nurseries was also bought in November for the medial marijuana license in Florida that authorizes the company to operate 35 dispensaries in the state along with cultivation facilities. In February, the Falcon International was bought in a deal for a vertically-integrated operator in California along with six licenses in Arizona from Devine Holdings. The big deal came in March with the $850 million offer for Verano Holdings that adds a multi-state operator (MSO) to the mix.

All of these deals add substantial revenues and scale that aren’t fully included in the Q4 results. Even after the quarter close, the company announced a deal for CannaPharmacy to add assets in New Jersey, Pennsylvania, Delaware and Maryland.

Harvest Health has gone from a company operating 10 retail locations in four states to one with access to 219 revenue-generating cannabis facilities throughout the U.S. and Puerto Rico with 142 retail dispensaries. At the end of 2019, the market won’t even recognize the Harvest Health of 2018.

Big Upside

Investors need to quickly breeze past the Q4 results and look forward to the pro-forma numbers for 2019 and beyond. Harvest Health forecasts pro-forma revenue reaching $350 to $400 million for the year with EBITDA margins of 20%.

Due to the acquisitions, Harvest Health has increased revenue estimates from just back in November of only $223 million. Also noteworthy is that the revenue estimates are based on the company only having 13 stores open here in April with a goal of opening 23 additional stores by the end of July. These additional stores will only contribute revenues for roughly half the year and automatically provide a big boost to 2020 numbers.

Harvest Health expects to have 60 stores by the end of the year prior to acquisitions that are included in the pro-forma revenue guidance. The current plan forecasts the combined company having 120 stores open by 2020.

The revenue goal reaches up to $1 billion by next year with EBITDA margins jumping to 30% to 35%.


The key investor takeaway is that Harvest Health is on a path to become one of the largest global cannabis companies, regardless of just focusing on the U.S. market. The stock has an estimated market valuation in the $4 billion range assuming all of these listed deals close. With upside from the $1 billion revenue estimate as recreational markets get approval; the stock is very appealing here.

To read more on the nitty gritty of what’s going on in the rising cannabis industry, click here.


Disclosure: The author has no position in CannTrust stock.

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