Seaport Global sets stock target with buy rating on AFCG, cites growth potential

Wednesday, Seaport Global Securities initiated coverage on shares of Advanced Flower Capital (NASDAQ:AFCG), a cannabis-focused financial institution, with a Buy rating and set a price target of $13.00. The firm highlighted several factors that could positively influence AFCG's performance in the upcoming years, including potential regulatory changes and industry-specific catalysts.

Advanced Flower Capital, recognized as the first institutional loan origination platform for the cannabis industry, went public during the peak of the last cannabis capital cycle post-2020 election. Despite challenges following that cycle, the company is expected to benefit from the current scarcity of capital and more stable pricing in the sector.

The analyst from Seaport Global Securities noted the growing market due to ongoing state-level legalization and normalization of interest rates by the Federal Reserve as additional positive indicators.

The analyst also pointed out the skepticism surrounding the broader cannabis industry, given past difficulties with reform efforts and poor stock performance. However, the firm believes that AFCG's experienced management team and thorough investment review process have allowed it to significantly outperform major industry benchmarks, citing a 37% total return since AFCG's first trading day.

Seaport Global Securities emphasized the unique position AFCG offers to investors, allowing them to be at the forefront of the capital structure in an emerging industry while earning returns similar to equity. The firm suggested that investors should consider increasing their exposure to AFCG before the company's potential becomes more widely recognized.

In other recent news, AFC Gamma, Inc. has made significant moves in the cannabis sector. The firm recently finalized an $11 million senior secured credit facility to fund the expansion of a new borrower in Georgia and increased its investments in BeLeaf Medical, LLC and Sunburn Cannabis to support their growth. These financial moves are part of AFC Gamma's broader strategy to support the expanding cannabis industry by offering tailored financing solutions to its clients.

Furthermore, AFC Gamma reported robust Q2 results, indicating a successful transition to a dedicated cannabis lender. The company's financial performance featured distributable earnings of $0.56 per share and a consistent dividend payout. AFC Gamma is managing a loan portfolio with a target of $100 million in origination for the year and maintains a strong cannabis pipeline valued at $346 million.

Moreover, AFC Gamma's portfolio holds $287.1 million across 12 loans and total assets of $458 million. The company also repaid a $35 million line of credit and holds cash and cash equivalents of $170.3 million. These recent developments suggest AFC Gamma's strategic shift and financial health position it to continue delivering value to its shareholders.

InvestingPro Insights

Recent data from InvestingPro adds weight to Seaport Global Securities' bullish stance on Advanced Flower Capital (NASDAQ:AFCG). The company's financial metrics and market performance align with the analyst's positive outlook.

AFCG's price-to-book ratio of 0.64 suggests the stock may be undervalued, potentially offering an attractive entry point for investors. This aligns with the analyst's recommendation to increase exposure before the company's potential is fully recognized.

The company's strong recent performance is evident in its 25.89% price total return over the past three months and 28.47% over six months. This robust growth supports the analyst's observation of AFCG outperforming industry benchmarks.

InvestingPro Tips highlight AFCG's significant dividend yield, currently at 13.61%, which could appeal to income-focused investors. Moreover, the company's liquid assets exceeding short-term obligations indicate financial stability, a crucial factor in the volatile cannabis industry.

For investors seeking a deeper understanding of AFCG's potential, InvestingPro offers 6 additional tips, providing a more comprehensive analysis of the company's prospects in this emerging market.

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