Village Farms International Inc.

Village Farms International Inc. (NASDAQ: VFF) is a North American vertically integrated greenhouse producer. Produce, Cannabis-Canada, Cannabis-US, and Energy are the company's segments. Tomatoes, bell peppers, and cucumbers are produced, marketed, and sold in the Produce section. Cannabis-Canada develops and distributes cannabis products to other licensed providers and provincial governments in Canada and across the world. Cannabidiol (CBD)-based health and wellness products, including ingestible, edible, and topical applications, are developed, and sold by the Cannabis-US business. The Energy company generates electricity and sells it to customers under long-term contracts.

Key Highlights and updates

• In Ontario, Alberta, and British Columbia, Pure Sunfarms remained the most popular dried flower brand.
• Pure Sunfarms' 1.1 million square foot Delta 3 cannabis production facility gained EU GMP accreditation, allowing the company to export EU GMP-certified medicinal cannabis to importers and distributors in EU GMP-required foreign markets.
• Pure Sunfarms introduced 29 new SKUs across four product categories, maintaining its position as the top-selling dried flower brand in Ontario, Alberta, and British Columbia.
• Balanced Health Botanicals (acquired in the third quarter of 2021) and Rose LifeScience (acquired in the fourth quarter of 2021) are integrating well. In the first quarter of 2022, each company expanded its product offerings:
• Balanced Health's CBDistillery brand launched its hemp extract in over 1,000 PetSmart stores across the United States through a partnership with leading pet supplement brand Zesty Paws.
• Rose launched 14 new cannabis SKUs and shipments of its own brands increased 85 percent compared to the fourth quarter of 2021.

Important financials from the Q1 FY22 results

• For Q1FY22, total revenue increased by 34% year over year to USD 70.2 million.
• Due to Inflationary Pressures on the Produce Business, the consolidated net loss for Q1FY22 was (USD 6.5 million), or (USD 0.07) per share, compared to (USD 7.4 million), or (USD 0.10) per share in Q1FY21.
• For Q1FY22, the consolidated adjusted EBITDA was negative (USD 6.1 million), compared to a positive adjusted EBITDA of USD 0.4 million in Q1FY21.
• The Canadian cannabis industry has produced positive adjusted EBITDA for the 14th quarter in a row.

Stock recommendation

VFF's stock price has corrected by 57.20% in the past six months and is currently in the middle of its 52-week range of USD 2.81 to USD 11.45.  As can be seen in the chart below, the price is currently below the short-term (50-day) SMA and long-term (200-day) SMA. The price is forming a bullish divergence on the daily chart which will be confirmed in case the price will break USD 3.50 level upwards and form a higher low on the daily chart.

Given the stock's considerable correction in the past six months, financial results, and technical analysis, we propose a "Watch" rating on the stock at its current price of USD 2.94 as of June 08, 2022, with further analysis when the price breaks USD 3.50 level upside and form a higher low on the daily chart.

One Year Technical Chart, as of June 08, 2022. Data Source: REFINITIV, Analysis by Kalkine Group

Technical Analysis Summary

* Entry price as of June 08, 2022.

Investors can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and the uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavorable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decisions should be made depending on the investors' appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above. 

Note 3: The report publishing date is as per the Pacific Time Zone.