Flora Growth Corp Had a “Foundational Year”
With a market cap of just $80.1 million, Flora Growth Corp (NASDAQ:FLGC) is a small, overlooked pot stock.
Don’t let its penny-stock status scare you away, though. FLGC stock is entrenched in penny-stock territory more because of the drawn-out process of legalizing marijuana at the U.S. federal level than anything going on at Flora Growth.
Flora Growth Corp reported an amazing 2021 and has had an excellent 2022 so far. The company announced great unaudited first-quarter 2022 results and has provided strong guidance for the full year.
Flora Growth Corp’s chairman and CEO, Luis Merchan, said 2021 was “a foundational year” for the company. In addition to strengthening its balance sheet and completing key infrastructure projects, the company announced a raft of acquisitions last year.
Despite those exciting developments, Flora Growth stock has been taking a beating. As of this writing, the stock is down by:
- 36% over the last month
- 45% over the last three months
- 53% over the last six months
- 71% year-over-year
Flora Growth Corp’s recent accomplishments have sparked analyst interest in FLGC stock. Wall Street analysts’ average 12-month share-price target for Flora Growth stock is $6.00, which points to potential gains of 506%.
Chart courtesy of StockCharts.com
About FLGC Stock
Flora Growth Corp is a leading all-outdoor cultivator, manufacturer, and global distributor of cannabis products. The company is focused on building a “design-led collective of plant-based wellness and lifestyle brands.” (Source: “Company Overview: May 2022,” Flora Growth Corp, last accessed May 30, 2022.)
Flora Growth uses natural cultivation practices to supply marijuana derivatives to its Commercial, Brands, and Life Sciences divisions.
Flora Growth Corp’s “Mambe” brand provides juices, chocolate bars, dried fruits, and beans. Its “Tonino Lamborghini” brand provides ready-to-drink cannabidiol (CBD) coffee beverages.
You can find the company’s products at major retailers including Macy’s Inc (NYSE:M) and Walmart Inc (NYSE:WMT).
Strategic Acquisitions & Joint Ventures
In mid-November 2021, Flora Growth Corp completed its acquisition of Vessel Brand, Inc in a cash and stock deal valued at $30.0 million. (Source: “Flora Growth Completes Acquisition of Vessel Brand Inc.” Business Wire, November 15, 2021.)
Vessel is a cannabis accessory and technology business that makes direct-to-consumer and retail sales in the U.S and Canada. It reported 90% year-over-year revenue growth.
The Vessel acquisition is expected to add revenue in the range of $35.0 to $45.0 million in 2022.
In late November 2021, Flora Growth Corp formed a joint venture with Avaria Health and Beauty Corp to distribute the award-winning “KaLaya” brand across Latin America. (Source: “Flora Growth Forms JV With Avaria Health and Beauty to Distribute Award-Winning Pain Products Across LATAM,” Business Wire, November 26, 2021.)
KaLaya, which has sold more than a million units, is distributed across Canada through major retailers. Flora Growth is producing CBD-infused products for the joint venture.
Flora Growth Corp’s momentum has continued in 2022.
In February, the company completed its acquisition of “JustCDB,” a leading wellness brand that increases the company’s footprint to more than half a million consumers and 14,000 retail stores in the U.S. (Source: “Flora Growth Completes Acquisition of Category Leading Wellness Brand JustCBD; Enhances U.S. Infrastructure and CPG Portfolio,” Flora Growth Corp, February 28, 2022.)
JustCBD has approximately 300 products and an omnichannel approach, which includes a direct-to-consumer business and a network of more than 14,000 distribution points across the U.S. and internationally. In fiscal 2020, JustCBD generated revenue of $28.0 million and adjusted earnings of $7.0 million.
The JustCBD acquisition is expected to immediately contribute to Flora Growth Corp’s 2022 revenue and earnings
On May 23, Flora Growth announced that it had acquired the CBD brand “Masaya.” Created by leading cell biologist Dr. Annabelle Manalo-Morgan, Ph.D., Flora intends to distribute the brand and its formulations worldwide. (Source: “Flora Growth Acquires CBD Brand Masaya,” Flora Growth Corp, May 23, 2022.)
Flora Growth will use the proprietary, patent-pending formulation “Masaya Pure” in its clinical trials with the University of Manchester. The formulation is in the process of being registered with a Colombian regulatory agency as one of the first steps for distribution beyond the U.S.
Flora Growth Corp Reports High Revenue Growth & Reaffirms Guidance
For fiscal 2021, ended December 31, Flora Growth Corp reported revenue of $9.0 million, a significant increase over its 2020 revenue of $100,000. The company’s revenue in the second half of 2021 climbed by 329%, compared to the first half of the year. (Source: “Flora Growth Reports Fiscal Year End 2021 Results,” Business Wire, May 10, 2022.)
Flora Growth’s gross profit in 2021 was $2.4 million, versus $71.0 million in 2020. The company reported a 2021 net loss of $21.9 million, compared to a 2020 net loss of $14.3 million.
Flora Growth Corp ended the year with cash on hand of $37.6 million.
For fiscal 2022, Flora Growth reiterated its previous guidance, expecting to report revenue in the range of $35.0 to $45.0 million, which would represent growth of 288% to 400%.
2021 Operating Highlights
In 2021, Flora Growth Corp:
- Raised an aggregate of approximately $53.7 million in capital
- Completed the acquisition and integration of Vessel Brand, Inc
- Completed the build-out of its all-outdoor cultivation and on-site extraction facility to prepare for exporting high-tetrahydrocannabinol (THC) dry flower to Colombia
- Signed licensing agreement with the Tonino Lamborghini brand for the development and distribution of marijuana-based beverages in the U.S.
- Entered a partnership with Hoshi International to increase Flora Growth’s presence in Portugal, Malta, and other key European countries
- Expanded its brand portfolio and retail presence, including at Macy’s, Walmart Mexico, and Coppel
- Opened a brick-and-mortar location in Miami, FL
- Initiated the development of its new Life Sciences division, which launched initial clinical trial protocols in partnership with the University of Manchester to study fibromyalgia
- Closed an oversubscribed public offering of $34.5 million (Source: “Flora Growth Closes $34.5 Million Public Offering,” Business Wire, November 23, 2021.)
2022 Year-to-Date Operating Highlights
So far in 2022, Flora Growth Corp has:
- Completed its acquisition of the JustCBD brand
- Announced its acquisition of the CBD brand Masaya
- Received a 2022 export quota for 43.6 tonnes of high-THC cannabis in Colombia
- Completed the necessary steps to be allowed to commercially plant and export psychoactive cannabis
- Completed letters of intent to begin globally distributing high-THC and high-CBD flower in the third quarter of 2022
Analyst Take
Flora Growth Corp might be an under-the-radar U.S. cannabis stock, but with everything going on at the company, it won’t remain under the radar for long.
In 2021, the company completed strategic infrastructure projects and strengthened its balance sheet. Flora Growth Corp also announced four acquisitions, which are expected to accelerate the company’s financial growth.
Additional acquisitions or upward revisions to the company’s guidance could see Flora Growth stock rally considerably. It’s what Wall Street analysts expect to happen.
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