Anonymous Analytics goes long cannabis with Turning Point Brands

Charlotte's Web Holdings

10/07/2019 14:35

By Jennifer Ablan
    July 10 (Reuters) - Activist research group Anonymous
Analytics has turned its attention to the cannabis industry,
initiating a buy rating on Turning Point Brands Inc  TPB.N  in a
report on Wednesday.
    The group, which holds shares in Turning Point Brands,
called it "a highly profitable, but woefully under-covered and
under-valued company" with a network of 1.5 million online
customers and 155,000 stores. 
    The company, which sells periphery products including
rolling papers, chewing tobacco and vapes, is covered by only
two analysts, the group said.
    "As its CBD (Cannabidiol) story gains awareness, we expect
substantial market interest," the report said. "Investors are
thirsty for an established, profitable and non-speculative
company in the cannabis space. TPB is it."
    Anonymous Analytics, which describes itself as a "faction"
of the global Anonymous activist movement, first gained
attention earlier this decade by exposing irregularities at
several Hong Kong-listed Chinese companies, accusing them of
misleading investors, while also selling the stocks short. 
    The group is part of a broader community of activist
investors and research firms that focus on a small number of
stocks which includes Muddy Waters' Carson Block and Andrew Left
of Citron Research. 
    Anonymous Analytics has a target price of $118 per share on
Turning Point Brands, whose shares closed at $52.02 on Tuesday. 
    "Most cannabis companies trading at nosebleed valuations are
loss-making start-ups that are still trying to build out their
distribution infrastructure and compliance," its report said.
    "TPB already has the distribution, has a profitable core
business with a proven management team, and has the regulatory
background. If TPB traded at even a fraction of the valuation of
other cannabis names, the stock would double overnight."
    The group said the largest CBD pureplay is Charlotte’s Web
Holdings  CWEB.TO , which has its products in only 6,000 stores
but is valued at $2 billion. 
    "The cannabis industry is currently in its Wild West phase
filled with both excesses and real potential," Anonymous
Analytics said in an email to Reuters. "It’s threading that path
that’s going to be interesting, and for the most part, we think
there will be a lot of companies that blow up. There will also
be a few companies like TPB that can capitalize on legalization.
We’re gonna be on the lookout for both."

 (Reporting By Jennifer Ablan
Editing by Sonya Hepinstall)
 ((jennifer.ablan@thomsonreuters.com; tel 646 223 6297))