LFTD Partners Inc. LIFD, a leading psychoactive cannabis-derived products (PHD) company, is trading at just 0.2x FY24 EV/Sales, a steep discount. While the stock has plummeted over 90% from its April 2021 peak, the company remains cash flow positive with a net cash position and is poised to expand through mergers and acquisitions.
Despite regulatory pressure, LIFD's compliance strategy is expected to drive market share growth: The company's stock could rise five-fold by December 2025, according to a report by Zuanic & Associates.
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Recognition and growth potential
LIFD is trading at 0.2x CY24 EV/sales, below its estimated liquidation value. According to Zuanic's report, if LIFD reaches 0.5x projected sales, the stock could rise 5x by December 2025.
This makes the stock an attractive, albeit speculative, investment. Analysts estimate the probability of a federal regulatory scenario for PHD at just 10%, further supporting the stock's upside potential. However, LIFD's future will depend heavily on regulatory developments.
Regulatory risks and opportunities
LIFD operations have been significantly impacted by regulatory challenges at both the state and federal levels, with 19 states banning PHDs entirely.
However, Zuanic said future farm bills are expected to delegate PHD regulation to individual states, potentially allowing LIFDs to use compliance strategies in states with strict regulations rather than outright bans.
This can lead to increased market share and revenue growth.
Zuanic noted that LIFD has the opportunity to benefit from collaboration with THC cannabis companies entering the PHD space, which could validate PHD market suitability and lead to joint lobbying efforts.
Long-term regulatory convergence between PHD and THC products is another potential positive.
Related article: 'This is life or death': Families of disabled kids panic over Governor Newsom's hemp CBD ban, consider lawsuit
Bulls vs Bears
In our bullish scenario, LIFD's EV/sales multiple could return to the 0.5-1.0x range if the regulatory environment becomes clearer and no state bans are enacted in key markets.
That suggests a lot of upside. In a bearish scenario, if federal legislation leads to a ban on PHD or the company's dietary supplement strategy fails, the stock could fall outright. But Zuanic estimates there's only a 10% chance of this worst-case scenario happening.
Read next: Governor Newsom’s cannabis prohibition goes into effect: What it means for the industry, investors and patients
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