Village Farms Posts Wider Loss in Q2

Village Farms International (VFF) reported its second-quarter results on August 9 before the opening bell. This quarter marks the fourth consecutive quarter of sequential growth in Retail Branded sales at 22% and 11th consecutive quarter of positive EBITDA for its subsidiary Pure Sunfarms.

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Consolidated sales came in at $70.4 million for the quarter ended June 30, an increase of 48% from $47.6 million in the prior-year quarter. This includes cannabis sales of $24.8 million from Pure Sunfarms, $45.5 million in produce sales, and $0.1 million of clean energy sales.

Meanwhile, Village Farms reported a net loss of $4.5 million ($-0.06 per share) in Q2 2021, compared to a net loss of $0.1 million (-$0.01 per share) in Q2 2020. (See Village Farms International stock charts on TipRanks)

Pure Sunfarms became the top-selling licensed producer of dried flower products in Ontario in the second quarter. It was also the top-selling dried flower brand in Ontario, in Alberta, and in British Columbia.

Village Farms’ CEO Michael DeGiglio said, “In the United States, we are encouraged by the federal cannabis bill recently brought forward by Senate leadership and view it as an integral step in the process of regulatory change that would allow Village Farms to participate in the high-THC cannabis market in the U.S. We have identified multiple potential pathways to participate in the U.S. high-THC cannabis market and continue to refine multiple strategies that will enable us to move swiftly and aggressively to leverage our tremendous cannabis success in Canada for the largest cannabis market in the world, including strategies that could see us enter the U.S. market in advance of converting our Texas operations.

“We are optimistic that we will continue to see substantive progress in the months to come and are planning accordingly. With the benefit of having now operated our Canadian cannabis business for several years, we expect our Texas greenhouse operations can represent at least a $1 billion sales opportunity in cannabis to Village Farms.”

In July, Roth Capital analyst Scott Fortune maintained a Buy rating on VFF with a price target of $18.00 (C$22.62). This implies 83.1% upside potential.

Fortune stated that the Delta 2 Greenhouse license amendment, which allows Village Farms to grow cannabis immediately in the first half of the already converted facility, increases production capacity by 50% and demonstrates the company’s confidence that its leading share of dried flowers will support sales growth as other Canadian operators continue to scale back operations. The analyst considers that the company’s “production confirming growth visibility” provides an attractive valuation.

Overall, consensus on the Street is that VFF is a Strong Buy based on five Buys and one Hold. The average Village Farms price target of C$22.97 implies 87.2% upside potential to current levels.