Village Farms International VFF VFF reported second-quarter financial results on Monday morning, which were followed by an analyst note by Cantor Fitzgerald's Pablo Zuanic.

Cantor remains neutral on Village Farms, tweaking down the 12-month price target to $11.50 from $11.70. Current shares sell at $9.93 at the time of this writing.

“Although we stay Neutral, we realize the stock discount to larger peers (that are losing share) could narrow over time as the branded cannabis unit gains scale, and strategic actions are taken that can allow investors to better value the non-cannabis assets,” Zuanic said.

Aside from its cannabis business, the company produces tomatoes, cucumbers and peppers in vertical greenhouse farms.

Village Farms reported consolidated sales of $70.4 million as compared to $47.6 million in the same period of 2020: a boost partly attributed to Pure Sunfarms, the company’s cannabis brand, which reported second-quarter revenues of $24.76 million. 

Zuanic sees a constructive future for the greenhouse grower and stated the company “reported solid cannabis trends this morning, with branded cannabis sales up 22%,” showcasing MSO-like EBITDA margins. This growth has outpaced the market by a factor of 2x.

The branded cannabis unit, which encompasses 26% of the company's total reported revenues, is well-placed to continue to gain share in Canada, Zuanic said.

This growth was not reflected in the stock, which was only up 1% after earnings and is now riding closer to the last market close price of $9.91.

With an expanding range of dried flower offerings, including new SKUs and new high potency strains, the analyst expects the company to continue to outgrow the overall branded recreational market. A line of cannabis 2.0 products (like vapes, edibles and tinctures) could also be a booster for future sales.

Lead image by Ilona Szentivanyi. Copyright: Benzinga.