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Valens target price raised to $3.75 at Stifel Nicolaus Canada

Stifel Nicolaus Canada has increased its target price on shares of The Valens Company (TSE:VLNS) (OTCQX:VLNCF) (FRA:7LV) to $3.75 from $3.35, while maintaining a ‘Buy’ rating on the stock, after the cannabis extraction company reiterated its 1Q 2021 revenue guidance, with the broker’s analysts noting that the guidance in-line with their expectations while “demonstrating a strong return to growth to start the year.”  The Stifel analysts see even further upside as Valens executes on its strategic plan and returns to profitability. “More importantly, management provided a glimpse behind its strategy to enter the flower/pre-roll market, essentially doubling its addressable market,” they said. READ: Valens scales up and begins to show what it was ‘made to do’ The analysts noted that key details from the company included leveraging existing partnerships with the decision prompted by customers, suggesting a demand-pull versus a supply-push. As well, Valens said it expects to enter the Manitoba and Quebec markets near-term, which the analysts believe will unlock about 20% more market potential while compounding the company’s flower entry. The Stifel Nicolaus Canada analysts said the company’s planned expansion into Manitoba and Quebec could add about $740 million in potential Canadian retail sales. They also singled out Valens’ opportunity in Quebec, where Cannabis 2.0 product limitations in Canada’s third-largest cannabis market have resulted in an edibles space dominated by beverages. The analysts noted that Valens could potentially expand its market share in the French-speaking province given its proximity to the company’s Greater Toronto Area (GTA) facility, which specializes in beverage manufacturing.    As well, the analysts highlighted the company’s “impressive accomplishment” of manufacturing one out of every five vape products in its recreational market, noting that Valens is expected to launch gummies beginning in 2Q 2021 as a second step in its edibles strategy, which they believe will drive sales growth as the company should be able to replicate its historical success in the broader edibles category.   “Overall, we believe Valens’ expanded positioning provides investors with a more fulsome Canadian market exposure at a valuation unjustifiably discounted versus (other) junior Licensed Producers,” they concluded. Contact Sean at sean@proactiveinvestors.com

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