AGP starts Harvest Health at buy; PT $8

Alliance Global Partners launched coverage of Harvest Health & Recreation (CSE:HARV) with a “buy” rating and price target of $8 (Canadian). The stock closed at $3.57 on Feb. 10.

“We believe the company is well-positioned to inflect to profitability in 2020 as cultivation comes online and revenues ramp – and see the pending Verano acquisition being complementary to the business,” writes analyst Aaron Grey.

In addition, he figures Harvest is poised to capitalize on adult-use legalization in Arizona and New Jersey, which “we view as two of the most likely states to go recreational in 2020.”

As a result, he figures the company’s discounted valuation to multi-state operator peers on a pro forma basis as an attractive entry point, “with the closing of its Verano acquisition, transition to profitability and November elections acting as catalysts throughout the year.”

Mr. Grey said that as the company’s geographic footprint becomes well-established after the closing of its acquisitions, “we expect Harvest will focus more on depth in existing states versus breath across new markets. We believe this will set the company up well to generate profits within its existing footprint and embed less execution risk from entering new markets.”