Anonymous Analytics takes the long view on cannabis investment
Group initiates a buy rating on ‘undervalued’ Turning Point Brands
New York — Activist research group Anonymous Analytics has turned its attention to the cannabis industry, initiating a buy rating on Turning Point Brands (TPB) in a report on Wednesday.
The group, which holds shares in TPB, called it “a highly profitable, but woefully undercovered and undervalued company” with a network of 1.5-million online customers and 155,000 stores.
The company, which sells periphery products including rolling papers, chewing tobacco and vapes, is covered by only two analysts, the group said.
“As its CBD (cannabidiol) story gains awareness, we expect substantial market interest,” the report said. “Investors are thirsty for an established, profitable and nonspeculative company in the cannabis space. TPB is it.”
Anonymous Analytics, which describes itself as a faction of the global Anonymous activist movement, first gained attention earlier this decade by exposing irregularities at several Hong Kong-listed Chinese companies, accusing them of misleading investors, while also selling the stocks short.
The group is part of a broader community of activist investors and research firms that focus on a small number of stocks which include Muddy Waters’s Carson Block and Andrew Left of Citron Research.
Anonymous Analytics has a target price of $118 per share on TPB, whose shares closed at $52.02 on Tuesday.
“Most cannabis companies trading at nosebleed valuations are loss-making startups that are still trying to build out their distribution infrastructure and compliance,” its report said.
“TPB already has the distribution, has a profitable core business with a proven management team, and has the regulatory background. If TPB traded at even a fraction of the valuation of other cannabis names, the stock would double overnight.”
The group said the largest CBD pureplay is Charlotte’s Web Holdings, which has its products in only 6,000 stores but is valued at $2bn.
“The cannabis industry is currently in its Wild West phase filled with both excesses and real potential,” Anonymous Analytics said.
“It is threading that path that’s going to be interesting, and for the most part, we think there will be a lot of companies that blow up. There will also be a few companies like TPB that can capitalise on legalisation. We’re gonna be on the lookout for both.”