Mackie Research starts Cannabis Wheaton at buy; PT $3

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Mackie Research initiated coverage of Cannabis Wheaton with a “buy” rating and $3 price target. The stock closed at $1.56 on April 2.

Analyst Greg McLeish writes that Wheaton’s “unique model is made up of three distinct verticals – upstream, midstream and downstream.” This platform provides early-stage licensed producers and late-stage licensed producer applicants with non-dilutive financial capital and ongoing regulatory support in exchange for receiving a minority equity interest, as well as the rights to a negotiated off-take of the cannabis produced. 

The Wheaton model allows it to access cannabis production from a growing collection of diverse partners, enhancing its position to participate in anticipated Canadian provincial distribution channels, he added. 

Through existing agreements, Mr. McLeish said the company has locked up more than 100,000 kilograms of production, “positioning it as one of the leading suppliers for both medical and recreational cannabis markets.”

In addition, Wheaton is pursuing international opportunities to access higher margin channels, Mr. McLeish said. The company recently made a strategic investment in Uruguay that will serve as its cultivation and extraction platform in Latin America.

The company also is looking for a similar cultivation platform in the European Union. And Wheaton has entered into an international supply agreement with Aphria, which will help accelerate its international distribution strategy.

Stephen Kilmer