Pacific Trader: Amid the cannabis bust, Rubicon Organics is looking like a survivor

Vancouver-based Rubicon might have smoked out the competition

The stock: There are two ways to make money off a bubble. You can get in early and sell early, before it pops. Or you can try to spot the survivors that will, like today’s mega-cap technology stocks once did, either withstand the sudden deflation or sprout up in the aftermath. The cannabis boom was never so good as when legalization was a matter of speculation. But there is a market for legal cannabis products out there, just not as big a market as the hypesters would have had us believe, pre-2018. And one of the survivors still in position to serve it is Vancouver’s Rubicon Organics (TSXV:ROMJ).

The drivers: Rubicon is not a commodity pot grower. It’s a specialty company focused on high-margin branded products like flower, hash, edibles, concentrate, CBD and topicals. It owns the Simply Bare Organic, 1964, Homestead Cannabis Supply and Wildflower brands and a 20-acre greenhouse farm in Delta where the raw material is grown. The company reported $40.1 million in revenue, $4.4 million in adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) and a net loss of $1.8 million for 2023. That marks seven consecutive quarters of positive AEBITDA.

With the confirmation of interim CEO and CFO Margaret Brodie as permanent CEO and the appointment of Janis Risbin as CFO in February, Rubicon is one of the few women-led companies in the notoriously bro-ridden cannabis sector.

One possible growth catalyst in the coming months is the planned launch of a line of vape products in May, along with the possibility of picking up favourably priced assets in an industry that continues to consolidate. As of Tuesday, April 9, Rubicon stock was trading at 39 cents a share.

Word on the street: “Rubicon continues to have strong market share within the premium segment across its markets,” Haywood Capital Markets analyst Neal Gilmer and associate Colin George wrote in a note to clients last week. “The company remains prudent in operating expenses with a solid balance sheet. We believe the company is positioned to establish itself in a strong niche segment of the market.” Haywood Capital Markets has a “buy” rating and $1.40 price target on the stock.

Coming and going: Vancouver-based forest companies West Fraser Timber Co. (TSX:WFG) and Mercer International (NASDAQ:MERC) have dissolved their joint venture over the Cariboo Pulp and Paper mill in Quesnel after six years. Mercer had acquired the 50-percent interest as a result of its purchase of the Peace River Mill in Alberta. West Fraser will continue to run the Cariboo mill as sole owner.