On Tuesday, Craig-Hallum analyst Eric Des Lauriers updated the price target for Goodness Growth Holdings (OTC: GDNSF) shares, a U.S. cannabis multistate operator, raising it to $0.45 from the previous $0.20. The Hold rating on the stock was maintained.
Goodness Growth Holdings, recognized for its specialized scientific approach and intellectual property, is a leading market player in Minnesota, where the medical cannabis program is expanding. The state is also on track to open its adult-use cannabis market by 2025. In addition to its Minnesota operations, Goodness Growth has significant business in the newly legalized cannabis markets of Maryland and New York.
The company's growth trajectory experienced a setback due to the fallout of a planned acquisition by Verano, which was canceled in October 2022. Goodness Growth Holdings claims the termination was wrongful, leading to ongoing litigation. The management of GDNSF believes that potential damages from the lawsuit could become a substantial asset.
In the meantime, Goodness Growth has been focusing on streamlining operations, which includes the recent move to sign a binding term sheet to divest its New York operations. This is part of the company's "CREAM & Fire" strategy, emphasizing cash preservation and product quality to improve financial and operational performance.
Despite the operational improvements and a positive outlook for the income statement, the company's balance sheet still presents risks with $60 million in current debt against $16 million in cash as of December 31, 2023. There is also the potential for a tax refund and lawsuit proceeds, which could significantly benefit the balance sheet, but the timing and amounts of these are uncertain.
The new price target reflects a 6.9x EV/EBITDA multiple based on Craig-Hallum's 2024 estimates for Goodness Growth Holdings. The analyst's decision to maintain a Hold rating indicates a cautious but optimistic view of the company's future financial health.
InvestingPro Insights
Goodness Growth Holdings (OTC: GDNSF) has garnered attention with its scientific approach to the burgeoning U.S. cannabis industry. As investors consider the recent price target update from Craig-Hallum, real-time data from InvestingPro provides a deeper dive into the company's financial health and market performance.
InvestingPro data highlights a market capitalization of $61.22 million, reflecting the company's current valuation in the market. Despite a significant revenue growth of nearly 19.88% over the last twelve months as of Q3 2023, the company's P/E ratio remains negative at -0.979, indicating that it is not currently profitable. This aligns with the InvestingPro Tip that analysts do not anticipate the company will be profitable this year.
However, the stock has seen a high return over the last year with a 248.33% price total return, suggesting investor optimism in the face of operational challenges. This performance is complemented by strong returns in shorter time frames, including a 17.57% return over the last month and a striking 76.61% over the last three months. It's worth noting that Goodness Growth Holdings is navigating its financial strategy without offering dividends to shareholders, as pointed out in another InvestingPro Tip.
For investors looking to delve further into Goodness Growth Holdings' financials and market performance, more InvestingPro Tips are available. There are 10 additional tips listed in InvestingPro to help refine investment strategies. To access these insights, consider using coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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