The cannabis industry is currently in the spotlight, thanks to a broader acceptance of marijuana for both medicinal and recreational purposes around the globe - a shift that has been accompanied by some significant legislative proposals. One standout example is the recent vote by Germany to partially legalize cannabis for personal use, opening the door to new market opportunities and growth. In the U.S., meanwhile, investors are still awaiting news on the proposed rescheduling of marijuana, which would be a boon for multi-state operators.
Against this backdrop, some cannabis stocks are absolutely killing it this year. But one that you might not have heard about yet is Village Farms International (VFF). This company isn't just another player in the cannabis industry. They've got a rich portfolio of North American cannabis and hemp growers and distributors, with a touch of agriculture and alternative energy exposure, too - plus, VFF's foray into the German market could be a game-changer after parliament's landmark vote on the green stuff.
Now, you might be thinking, "If VFF is so great, why haven't I heard about it?" Fair point. Only a few analysts are covering this stock - but those who are think VFF is primed for more upside. What's behind the bullish view on Village Farms stock? Read on to find out.
About Village Farms International Stock
Village Farms International (VFF) is a true green thumb in the agricultural game, with a diverse portfolio that spans fresh greenhouse-grown produce, cannabis, hemp, and even alternative energy drawn from landfill gas. They're not just growing plants; they're cultivating a multi-faceted business model that's blossoming 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 wide margin, up 55% during this time frame. Most of that upside has been racked up during the last month; VFF has more than doubled from its March 13 low of $0.58.
However, the penny stock certainly hasn't been immune to some pruning. VFF is down about 94% from its all-time highs set in 2021, and as of today, is newly compliant with Nasdaq share price listing standards.
The positive momentum started with VFF's Q4 earnings report, where the company reported a wider-than-forecast per-share loss, but exceeded Wall Street's revenue consensus. Consolidated sales were up by 7% year-over-year to $74.2 million, surpassing the average analyst forecast by more than $3 million. Despite missing estimates, the net loss also improved year-over-year, shrinking to $22.5 million, or $0.20 per share, from the previous year's $49.3 million, or $0.54 per share.
And while the cash flow situation shows more cash used - up to $5.2 million from $1.5 million the previous year - management offered some insight on the earnings call. VFF ended Q4 with $35.3 million in cash and $79.6 million in working capital, while the company had $13 million in net debt - "a level that we are very comfortable with," according to CFO Stephen Ruffini.
“We may be the only major CBD hemp player not bleeding cash right now in the U.S. market," noted CEO Michael DeGiglio.
Looking forward, analysts expect VFF to narrow its full-year loss to $0.06 per share in fiscal 2024.
What's Driving Growth at VFF?
One exciting development that's set to drive incremental cash flow is the recent launch of operations at the Delta Renewable Natural Gas (RNG) production facility in British Columbia. The partnership between Atlanta's Terreva Renewables and Village Farms Clean Energy (VFCE) subsidiary should be key toward pivoting the wholly owned VFF subsidiary towards a more sustainable business model, along with supporting profitability and cash flow.
But VFF's ambitions don't stop at cleaner energy. The company is also planting its flag in Europe with the build-out of its first indoor cannabis production facility in Drachten, Netherlands. This move is a big deal because VFF, through its majority-owned subsidiary Leli Holland, is one of only 10 licensees allowed to legally produce and distribute recreational cannabis in the Netherlands. With eyes set on the fourth quarter of 2024 to start production, VFF is gearing up to meet the Dutch demand for cannabis products, including flower, hash, and consumer favorites like pre-rolls. They're using cash on hand to fund the facility's construction, so they're not just blowing smoke when it comes to plowing their earnings back into expansion.
Crossing over to the UK, VFF made waves with the first shipment and launch of two of its leading cannabis brands. Pure Sunfarms and The Original Fraser Valley Weed Co., known as Fraser Valley, are now set to reach UK consumers through a distribution partnership with 4C LABS. This UK-based medical cannabis company is all about providing top-notch products to patients, and adds a fourth overseas medical market to VFF's portfolio.
Analysts haven't exactly rushed to cover Village Farms, but the ones who have are overwhelmingly optimistic about VFF's future. All three analysts covering the stock have given it a "strong buy" rating, with a mean target price of $1.68. That represents potential upside of 31.7% from current levels.
The Bottom Line on VFF Stock
With the cannabis sector ablaze, Village Farms International emerges as a standout player, strategically expanding its reach across North America and Europe. Backed by ambitious growth plans and a focus on cash flow generation, VFF could be a solid pick for investors who can stomach the higher risk that comes along with the potentially higher reward. Keep a close watch on this under-the-radar gem as it continues to carve its niche in the cannabis industry.
On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
