Shares of Village Farms International plunged 10.9% on Tuesday after the greenhouse grower reported lower-than-expected revenue for 4Q.
Village Farms’ (VFF) 4Q revenue of $47.4 million fell short of analysts’ expectations of $54 million. However, the top-line result marked a 43% year-over-year gain, mainly driven by the acquisition of Pure Sunfarms and increased pricing of tomatoes.
Notably, Pure Sunfarms is one of the largest licensed producers of greenhouse cannabis in Canada. The buyout added $12.8 million to Village Farms’ total revenue in 4Q.
For the quarter, the company reported GAAP earnings of $0.11 per share, which topped the Street’s estimates of $0.01. The bottom-line result also compared favorably with the year-ago quarter’s loss per share of $0.14. (See Village Farms stock analysis on TipRanks)
Village Farms’ CEO Michael DeGiglio said, “The fourth quarter was a solid finish to a year of significant achievement for Village Farms and our wholly owned Canadian cannabis subsidiary, Pure Sunfarms, which saw great success as it transitioned its focus to retail branded sales from nearly all sales in 2019 being non-branded, mainly to other producers.”
Following the earnings release, Alliance Global Partner analyst Aaron Grey raised the stock’s price target to C$26, or $20.83 (33.7% upside potential), from C$24 and reiterated a Buy rating. In a note to investors, Grey said that Village Farms would maintain or gain market share in Canada over time.
Overall, VFF has a Strong Buy consensus rating based on 4 Buys and 1 Hold. The average analyst price target of $22.77 implies upside potential of 46.2% to current levels. Shares have skyrocketed more than 479% in the last year.