Issue #63

From cannabis innovation to global pork processing — why VFF and SFD are top-rated by analysts

The global food revolution isn’t being won by laboratory meat or passing trends — it’s being decided in the greenhouses and processing plants that feed a growing planet 24/7. As the world moves toward more sustainable and efficient food systems, the advantage belongs to the companies that own the infrastructure: the ones that control the climate, the genetics, and the supply chain from seed to shelf.

This is where the agriculture conversation shifts from simple commodities to high-tech precision — and where the most resilient, high-margin winners are emerging.

👉 One company is a master of controlled-environment agriculture, pivoting its massive greenhouse footprint from everyday produce to the high-growth global cannabis market.

👉 The other is the world’s undisputed protein leader, leveraging a vertically integrated "farm-to-fork" model to dominate the global pork supply chain.

👉 Both are profitable, strategically diversified, and hitting new operational milestones that make them foundational plays for any agricultural portfolio.

In this edition, we break down the high-tech cultivator and the protein powerhouse fueling the modern food economy — and why these two stocks sit at the intersection of essential staples and high-margin growth.

Village Farms International (NASDAQ: VFF)

Village Farms International (NASDAQ: VFF) is a vertically integrated powerhouse in the agricultural sector, uniquely positioned as a bridge between traditional high-tech greenhouse produce and the rapidly expanding global cannabis and hemp markets. With over three decades of experience in mega-scale precision agriculture, the company has successfully leveraged its cultivation expertise to become one of the most efficient, low-cost producers in the cannabis industry.

Business Model and Revenue Streams 📦

Village Farms operates a diversified business model designed to balance the steady, lower-margin returns of traditional agriculture with the high-growth, high-margin potential of the cannabis sector. The company's revenue is primarily generated from three core segments:

• Canadian Cannabis: This is now the company’s primary revenue driver, led by its subsidiary Pure Sunfarms. Village Farms focuses on being a low-cost producer of high-quality dried flower and pre-rolls. By controlling the entire lifecycle from seed to sale, the company captures significant value, especially as it shifts its product mix toward premium, higher-margin SKUs.
• International Medical Cannabis & Exports: A rapidly growing segment where Village Farms exports EU-GMP certified cannabis from Canada to key markets like Germany, the UK, Israel, and Australia. This segment provides significantly higher margins than domestic wholesale.
• Produce (Fresh Agriculture): The company remains a leading producer of greenhouse-grown tomatoes, bell peppers, and cucumbers in North America. While this segment faces tighter margins due to commodity pricing, it provides the operational "backbone" and massive greenhouse infrastructure that can be converted for cannabis production as regulations evolve.
• U.S. Hemp and CBD: Through its "CBDistillery" brand, Village Farms operates a leading e-commerce platform for hemp-derived CBD products in the United States, positioning it for immediate scale if federal cannabis laws change.

Village Farms' business model is highly sensitive to macroeconomic policies regarding trade and energy. In 2026, the agricultural sector faces pressure from inflated input costs, particularly for fertilizers and technology components. However, recent U.S. executive orders aimed at rescheduling marijuana have provided a significant tailwind, potentially lowering the tax burden (Section 280E) and opening doors for future insurance coverage of CBD products.

Recent Performance and Corporate Developments 📈

Village Farms reported record-breaking financial results for the third quarter of 2025, signaling a major turning point in its quest for sustained profitability.

Q3 2025 Financial Highlights: 💰

• Total Revenue: Consolidated net sales reached $66.7 million, a 21% increase year-over-year.
• Net Income: The company posted a net income from continuing operations of $10.8 million ($0.09 per share), a massive reversal from the net loss reported in the same period of 2024.
• Adjusted EBITDA: This metric surged to $20.7 million, representing a record 31% margin.
• Segment Strength: The Canadian cannabis segment saw a 56% gross margin, driven by operational efficiencies and a deliberate shift away from low-value products toward higher-margin exports.

Strategic Initiatives and Mergers: 🤝

While there were no large-scale mergers in the last quarter, the company has focused on "internal" expansion and strategic appointments. In late 2025, Village Farms created a Global Strategy Officer role to oversee its international footprint. In the Netherlands, its Leli Holland subsidiary reached full capacity at its first facility, with a second, larger facility in Groningen on track to be operational by Q1 2026, which is expected to quintuple the company's Dutch production capacity. Additionally, the Board initiated a $10 million share repurchase program, signaling strong confidence in the company's undervalued stock price.

Profitability and Fair Value 🎯

Village Farms has officially moved into the "profitable" column, a rarity in the cannabis sector. Its path to growth is centered on two pillars:

1. Scaling International Exports: Because international medical cannabis sells at a premium compared to the crowded Canadian recreational market, every gram diverted to Europe or Australia significantly boosts the bottom line.
2. Texas Optionality: Village Farms owns over 5.5 million square feet of greenhouse space in Texas. If U.S. federal legalization or further rescheduling occurs, the company can pivot these assets to high-THC cannabis production almost overnight, providing a massive "hidden" value.

In terms of fair value, VFF is currently viewed as undervalued by several market models. While its P/E ratio may appear high compared to traditional food companies, its "narrative fair value" is estimated by some analysts to be closer to $4.90 - $5.00, suggesting a significant upside from its current trading range (approx. $3.40 - $3.55). The market appears to be underestimating the impact of the Dutch expansion and the potential for U.S. policy shifts.

Analyst Estimates and Ratings 📊

• Consensus Rating: The consensus among covering analysts is a "Strong Buy". The company has received multiple "Buy" ratings in the last 30 days as its profitability becomes more consistent.
• Price Targets: Wall Street analysts have set a median 12-month price target of $5.00, with high-end estimates reaching $5.25. This suggests a potential upside of over 40% from recent levels.
• Investor-Focused Takeaway: VFF is a "pick and shovel" play on both the future of legal cannabis and the resilience of high-tech agriculture.

Investor-Focused Takeaway: Is VFF Right for Your Portfolio?

Village Farms offers a unique risk-reward profile. Unlike "pure-play" cannabis companies that burn cash, VFF has a foundational agriculture business and has demonstrated it can generate significant positive EBITDA.

What to Watch in the Near Term:

• Groningen Facility Launch: Watch for the completion of the second Dutch facility in Q1 2026; this is a major revenue catalyst.
• U.S. Regulatory Updates: Any movement on the "SAFEN Banking Act" or formal rescheduling will disproportionately benefit VFF due to its Texas infrastructure.
• Input Costs: Monitor fertilizer and energy prices, which could compress margins in the produce segment.

Recommendation:

Village Farms (VFF) is a compelling growth-at-a-reasonable-price (GARP) candidate. With record profitability, a strong cash position of $88 million, and a clear expansion roadmap in Europe, it is well-positioned for investors looking for agricultural stability paired with high-upside cannabis exposure.

Smithfield Foods Inc. (NASDAQ: SFD)

Smithfield Foods Inc. (NASDAQ: SFD) is a globally recognized leader in the food industry and the world’s largest pork processor. Operating through a deeply integrated "farm-to-fork" model, the company has transformed from a traditional livestock producer into a diversified protein powerhouse. In January 2025, Smithfield returned to the public markets via an IPO, marking a new chapter of independence and strategic focus on the North American market.

Business Model and Revenue Streams 📦

Smithfield’s business model is built on vertical integration, allowing it to control every stage of the pork supply chain—from genetics and grain procurement to hog farming and final distribution. This structure provides significant scale and quality control, which the company leverages across three primary revenue streams:

• Packaged Meats: This is the company’s most profitable and stable segment, contributing approximately 59% of total revenue. It includes iconic brands like Smithfield, Farmland, Nathan’s Famous, and Eckrich. The focus here is on value-added products like bacon, sausage, and deli meats, which command higher margins than raw commodities.
• Fresh Pork: Smithfield processes and markets fresh pork products to retail and foodservice customers. While more sensitive to commodity price fluctuations, this segment benefits from the company's massive processing capacity and established international export channels to markets like China, Mexico, and Japan.
• Hog Production: The company owns and operates a vast network of farms. In a strategic shift for 2025-2026, Smithfield has been reducing its internal hog production to roughly 30% of its needs, sourcing the rest from independent farmers. This move is designed to lower exposure to volatile feed costs and commodity market risks.

Macroeconomic Policy Impact:

Smithfield is highly sensitive to trade policies and tariffs, particularly those affecting pork exports to Asia. However, in 2026, the company has successfully navigated these disruptions by diversifying its export outlets. Domestically, Smithfield is benefiting from automation-focused capital expenditure policies, utilizing technology to mitigate labor shortages and rising wage pressures in its processing plants.

Recent Performance and Corporate Developments 📈

Smithfield reported record-breaking results for the third quarter of 2025, demonstrating the success of its shift toward high-margin packaged goods.

Q3 2025 Financial Highlights: 💰

• Consolidated Sales: Net sales rose 12.4% year-over-year to $3.75 billion, driven by robust demand for branded products.
• Adjusted Operating Profit: The company achieved a record $310 million for the quarter, an 8.5% increase.
• Segment Excellence: The Hog Production segment saw a staggering 119.8% surge in profit, as market conditions improved and cost-saving initiatives on retained farms took hold.
• Liquidity: Smithfield maintains a rock-solid balance sheet with $3.07 billion in available liquidity and a very conservative net debt-to-EBITDA ratio of 0.8x.

Strategic News and Mergers: 🤝

Following its January 2025 IPO, Smithfield has been active on the acquisition front to bolster its European footprint. Its subsidiary, Smithfield Europe, recently acquired Goodies Meat Production in Romania. This move expands its private-label production capabilities and strengthens its position in the high-growth Eastern European market. Domestically, the company is investing $350–$400 million in 2026 primarily for automation and efficiency projects in its U.S. plants.

Profitability and Fair Value 🎯

Smithfield’s profitability is currently at a multi-year high. The company’s "Value-Added Strategy"—converting traditional bulk items like holiday hams into smaller, convenient "Anytime Favorites" and dry sausage products—has protected margins even as raw material costs rose.

In terms of fair value, SFD appears to be trading at an attractive discount. With a P/E ratio of approximately 11.4x, it is priced lower than many of its peers in the packaged food sector. Analysts suggest that the market has not yet fully priced in the reduced volatility from the company's new "asset-light" hog production strategy. Many valuation models place the stock's intrinsic value near $30.00, representing significant upside from its early 2026 trading price of roughly $23.50.

Analyst Estimates and Ratings 📊

• Consensus Rating: The consensus among Wall Street analysts is a "Strong Buy". Out of recent ratings, nearly 70% of analysts have issued their highest recommendations, citing the company's improved margin profile post-IPO.
• Price Targets: The average 12-month price target is $29.25, with some bullish estimates reaching as high as $33.00. This suggests a potential upside of 20% to 25%.
• Investor-Focused Takeaway: For income-seeking investors, Smithfield is an attractive play, currently offering an anticipated annual dividend of $1.00 per share, yielding roughly 4.2%.

Investor-Focused Takeaway: Is SFD Right for Your Portfolio?

Smithfield Foods is a "reopening" story for the public markets. It offers the stability of a consumer staple with the growth potential of a newly independent, streamlined entity. Its focus on reducing commodity risk while expanding high-margin branded products makes it a resilient choice for a volatile 2026 economic environment.

What to Watch in the Near Term: 📈

• Export Fluidity: Keep an eye on trade relations with China; while Smithfield has diversified, China remains a high-value outlet for specific pork cuts.
• Sausage Capacity: Monitor the performance of the new dry sausage production lines; these are key to the company’s margin expansion goals.
• Consumer Spending: While meat is a staple, a shift toward more "value brands" in the portfolio could occur if inflation persists.

Recommendation:

Smithfield Foods (SFD) is a high-conviction "Buy" for investors seeking a combination of value, dividends, and defensive growth. Its vertical integration provides a safety net that most competitors lack.

Final Take: The High-Tech Cultivator and the Protein Powerhouse Powering Agriculture

The modern food revolution isn’t about trends or lab-grown novelties — it’s about execution at the source. Sustaining a global population requires two things: precision cultivation that maximizes every square foot of land and integrated supply chains that deliver protein with clinical efficiency.

That’s where Village Farms (VFF) and Smithfield Foods (SFD) stand apart.

🌿 Village Farms (VFF) — The High-Tech Engine of Controlled Agriculture

• ✔ Precision Greenhouse Power: Leveraging 30 years of mega-scale cultivation to dominate the low-cost cannabis market.
• ✔ International Export Strategy: Capturing high-margin medical markets in Europe and Australia with EU-GMP certified products.
• ✔ Strategic Optionality: Over 5.5 million square feet of Texas infrastructure ready for immediate pivot upon U.S. federal shifts.
• ➤ Best for: Investors looking for a high-moat, "growth-at-a-reasonable-price" play that bridges traditional agriculture with the global cannabis boom.

🥩 Smithfield Foods (SFD) — The Global Backbone of Protein Production

• ✔ Vertical Integration Mastery: Controlling the entire value chain from genetics to the grocery aisle for maximum quality and cost control.
• ✔ High-Margin Branded Growth: Shifting from bulk commodities to premium, packaged meats like bacon and deli favorites.
• ✔ Post-IPO Momentum: A streamlined, "asset-light" strategy driving record profitability and strong dividend potential.
• ➤ Best for: Value-oriented investors seeking defensive exposure to a global staple with significant operational leverage and cash flow.

Investor Insight

🧩 Want high-upside agricultural tech with a foothold in emerging markets? → VFF

⚙️ Want a rock-solid protein leader with a massive dividend yield and global scale? → SFD

Bottom Line:

Global food security doesn't scale on promises — it scales on yield intelligence and supply chain reliability.

Village Farms owns the future of high-value indoor cultivation, while Smithfield Foods provides the essential protein infrastructure for the world’s dinner table. As the agricultural sector shifts toward efficiency and high-margin branded goods, VFF and SFD aren’t just participants — they are the foundation.

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Happy Trading
​— Team Premium Stock Alerts