Following the company’s second quarter results, GMP Securities analyst Martin Landry is still bullish on CannTrust Holdings Stock, Chart (TSX:TRST), if only a little less so.

On Tuesday, CannTrust reported its Q2, 2018 results. The company earned $104,905 on revenue of $9.05-million, a topline that was up 99 per cent over the same period last year.

“”We are very pleased with our Q2 results,” CEO Eric Paul said. “We continued to experience dynamic growth in all areas of the company as we execute our business plan aimed at being a market leader and innovator in the development of products and services to better serve our patients and physicians and to position us for the Oct. 17 legalization of the adult use recreational market.”

Landry says the quarter met his expectations except with regard to gross margins which were much lower than his estimate, something the analyst nonetheless thinks is a temporary phenomenon.

CannTrust Holding stock target price lowered

In a research update to clients today, Landry maintained his “Buy” rating, but lowered his one-year price target on TRST from $14.50 to $14.00, implying a return of 105 per cent at the time of publication.

“With a cash balance in excess of $80m, CannTrust is well funded to carry out its near-term expansion plans and bring production capacity to over 100 tonnes,” the analyst says. “CannTrust’s shares continues to trade at a significant discount vs senior LPs, providing investors with a good entry point. Our target price is derived using a DCF calculation using: (1) a 9% discount rate, (2) an average share of ~6% for the Canadian recreational market, (3) an average EBITDA margin of 27%, and (4) a terminal growth rate of 3%.”

Landry thinks CannTrust will generate EBITDA of $7.2-million on revenue of $86.0-million in fiscal 2018. He expects those numbers will improve to EBITDA of $60.9-million on a topline of $212.0-million the following year.