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Wall Street's Favorite Cannabis Stock

January 29, 2019 8:30 am
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Wall Street's Favorite Cannabis Stock

One of the hottest investment trends of the past year has been cannabis stocks, with traders betting that the push toward global marijuana legalization will continue in the U.S. and abroad. For the first time, a batch of Canadian cannabis-producing companies are listed on U.S. exchanges, and some early investors have already been handsomely rewarded.

New investors have plenty to consider when determining which cannabis stock is the best choice to buy at this point. Some of the hottest cannabis stocks have had such a strong run that they're now potentially overpriced, while some of the laggards have fallen behind the competition in securing partnerships and expanding their businesses.

Benzinga took a look at what Wall Street analysts have to say about top U.S.-listed cannabis stocks to determine which single stock is their consensus top cannabis stock to buy.

Here’s a look how the contenders stack up, according to data from the Wall Street Journal.

Cannabis Contenders

Of the 11 analysts rating Canopy Growth Corp (NYSE:CGC), 10 analysts have a Buy rating. That 91-percent Buy rating percentage might seem like enough to make Canopy the clear winner. However, the mean price target of those analysts is $69.19, and the 36-percent potential near-term upside isn’t as much as some other cannabis stocks.

There are nine analysts covering Aphria Inc (NYSE:APHA), and six (67 percent) of those analysts have Buy ratings. Aphria’s median price target of $14 suggests 93-percent upside from current levels.

Four out of the six (67 percent) analysts that cover Aurora Cannabis Inc (NYSE:ACB) have Buy ratings. The average price target of $10.83 suggests 54-percent near-term upside.

Cannabis real estate investment trust Innovative Industrial Properties Inc (NYSE:IIPR) is a perfect three for three in a small sample of Buy ratings from analysts. Unfortunately, the average price target of $53.17 suggests 13-percent potential downside, eliminating the stock from the running.

Of the seven analysts that cover Cronos Group Inc (NASDAQ:CRON), five (71 percent) have Buy ratings. However, after the stock’s 194-percent six-month gain, the average analyst price target of $20 suggests only 9 percent additional near-term upside.

There are 12 analysts covering cannabis pharma company GW Pharmaceuticals PLC (NASDAQ:GWPH), and all but one (93 percent) have Buy ratings on the stock. The average price target of $175.92 also represents 30.3-percent near-term upside as well.

Only half of the six analysts covering Tilray Inc (NASDAQ:TLRY) have Buy ratings on the stock, but the average price target of $131.25 suggests 65.4-percent of near-term upside.

Four out of five analysts covering cannabis biotech stock Zynerba Pharmaceuticals Inc (NASDAQ:ZYNE) have Buy ratings. The stock has the most potential upside of all, with the average target price of $18.40 representing 385 percent upside.

And The Winner Is…

Zynerba is clearly a stock for which a handful of analysts have very high hopes. However, five analysts is far from a Wall Street consensus, and Zynerba remains a niche biotech stock and a high-risk/high-reward speculative bet for now.

Wall Street seems most optimistic about Canopy Growth Corp and GW Pharmaceuticals. Each stock has at least 11 analysts covering it, each has a more than 90 percent recommendation rate and each has more than 30 percent near-term upside.

The one analyst that doesn’t rate Canopy a Buy rates it a Sell, whereas the one analyst that doesn’t rate GW Pharma stock a Buy rates it a Hold. Therefore, the tie breaker in an extremely close race goes to Wall Street's favorite cannabis stock to buy: GW Pharmaceuticals.

Related Links:

CIBC Initiates Coverage On Cannabis Stocks, Sees Bright Future Ahead

4 Cannabis Investors Share Their Predictions For Industry's Future