Analyst: Canopy Growth Can Outlast Near-Term Headwinds
Canopy Growth Corp (NYSE:CGC) shares are down nearly 50% in the past six months, but one analyst said Tuesday the company and its patient investors will ultimately be able to ride out the near-term headwinds in the cannabis space.
Piper Jaffray analyst Michael Lavery reiterated his Outperform rating for Canopy Growth and lowered his price target from $49 to $40.
Lavery expects the new Canopy management team to implement capital spending discipline needed for the company to be self-sufficient while the cannabis market matures.
“We continue to estimate a $250-500B potential long-term global cannabis market, with a $15-50B near-term opportunity, and believe Canopy is well positioned in the sector, particularly with US$2.3B in cash in an industry recently facing growing difficulty raising capital,” Lavery wrote in a note.
Click here for more information about the upcoming Benzinga Cannabis Capital Conference Oct. 22-23 in Chicago.
Lavery said capital will likely end up being a key differentiator among cannabis stocks given the massive amount of investments that will be required to scale up operations. Lavery said Cronos Group Inc (NASDAQ:CRON) is the only other licensed cannabis producer that's in a good enough capital position to invest in growing its business without necessarily needing to raise funds.
Lavery said vapor has been a near-term headwind for Canopy given concerns over illnesses and regulatory crackdowns, but he still believes vapor will end up a long-term bullish catalyst.
Cannabis investors are likely going to have to deal with extreme volatility and growing pains as the industry matures over the next several years. Rather than picking a potential winner in the group at this early stage, investors can reduce risk by choosing a handful of top early cannabis market leaders and diversifying their cannabis investment.
Do you agree with this take? Email email@example.com with your thoughts.
© 2021 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.