Pacific Trader: Has Village Farms International turned a corner?

The stock: The entire cannabis sector moved higher on May 1, when the U.S. Drug Enforcement Agency announced it would reclassify marijuana as a less dangerous substance than it is considered currently, likely easing legal distribution for recreational purposes stateside. But one Delta-based producer, Village Farms International (NASDAQ:VFF), had already been ascending to a higher plane since the middle of March. Closing at US$1.20 Tuesday (May 7), its stock is now up 62 percent since the start of the year.

The drivers: Strictly speaking, Village Farms isn’t just a pot grower. The company has been growing vegetables in Fraser Valley greenhouses for close to four decades, and food still accounts for nearly half its revenues. But in the eyes of the markets, it’s cannabis where the budding opportunity is.

Like other publicly traded cannabis stocks, VFF has been up and down. It was named to the S&P/TSX Composite in 2021 only to be dropped when it discontinued its Toronto listing nine months later. Then it ran into compliance problems on the NASDAQ Stock Market when its share price sank below US$1, but with its recent rise, those issues are resolved.

It’s also been outperforming its Canadian peers lately, increasing its market share north of the border for eight consecutive months. And to offset the financial and environmental cost of heating its greenhouses, it recently started up a renewable natural gas facility in Delta that generates methane from landfill waste.

Most importantly, it appears to be on the verge of turning the corner to profitability after reporting a narrow US$2.9-million loss (3 cents a share) on revenues of US$78.1 million in the first quarter Wednesday—the latter figure representing a 21-percent increase year over year. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was a positive US$3.6 million.

Word on the street: Of the seven analysts covering the stock, six have “buy” ratings and one, “hold,” with an average 12-month price target of US$1.84.

Coming and going: The federal Competition Bureau has launched an investigation into alleged greenwashing by Vancouver-based retailer Lululemon Athletica (NASDAQ:LULU). A complaint by at least one environmental organization, Stand.Earth, takes issue with claims regarding carbon-dioxide emissions in the company’s marketing and its use of the tagline “Be planet.”