This Marijuana Stock Makes Move to Support Positioning in Edibles
Recognizing the potential associated with making marijuana more accessible, cannabis companies are researching edibles that include cannabis extracts as ingredients. The potential to reach more customers through new consumer goods products has Constellation Brands estimating that the legal global marijuana market could be worth over $200 billion in 15 years.
One cannabis company that recently made a move in edibles is The Flowr Corporation (FLWPF). On Saturday, Flowr announced the hiring of celebrated Canadian Chef Ryan Reed to develop signature gourmet edible cannabis products for the Flowr brand.
Jefferies analyst Owen Bennett opined, “We believe this move is shrewd in a couple of ways. First, it focuses on a segment where there appears to be little attention from peers thus far (apart from Organigram). Second, it will help support the premium brand equity which is the segment of the market that Flowr is targeting […] While the edibles and beverage partnerships should support premium brand equity in these segments, Flowr’s premium flower should also support a strong vapour proposition where arguably it is easier to replicate the experience of the base flower and the taste of the terpenes.”
However, the analyst points out that there has been some uncertainty around capacity and manufacturing capability to deliver products: “While in theory the company is positioned well to compete in each derivative segment we still have little visibility around both extraction capacity and manufacturing capabilities. We would hope to get more clarity around this in the coming months before assigning too much value to this derivative optionality.”
Bennett reiterates a Buy rating on Flowr, but his C$5.70 price target suggests the stock has only 2% upside from current levels.
Overall. Flowr’s Kelowna campus features an annual run-rate capacity of about 7,600 kg, but the company expects to be producing 60,000 kg of premium and ultra-premium dried cannabis per year. How? The company is working on an indoor grow expansion to Kelowna spanning 140,000 square feet that’ll commence operations in the first quarter of next year, adding 45,000 kilos in annual output.
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