Cantor Fitzgerald has upgraded Aurora Cannabis Inc ACB to Overweight from Neutral with a price target of C$4.05, up from C$3.90. The analyst views Aurora as an attractively valued pure cannabis play.
He expects Europe, specifically Germany, to be a "relevant potential catalyst and sentiment driver" for cannabis stocks over the next 12-18 months.
Only Aurora and Tilray Inc TLRY have licenses to produce in Germany. Cantor believes Tilray and Aurora should be well-positioned on questions regarding imports in the future German recreational market and the limited number of new domestic production licenses issued.
The analyst is "more comfortable" recommending Aurora over Tilray as a play on Germany and views the selloff as a buying opportunity.
German Market: Cantor estimates the German medical market at about 30 tons, equivalent to €480 million (an average price of €16/gram) that could increase to €1.53 billion in 2028 (€3 billion taking retail prices) with improved quality and increased domestic production.
Flower accounts for 2/3 of sales and extracts for the balance (all reimbursed). There are about 60 suppliers, including importers and wholesalers.
The analyst expects ACB leads the flower segment with a ~15% share. TLRY is #1 in extracts but losing its market share on more potent offerings from competitors.
Price Action: ACB shares are up 4.23% at $1.48 during the premarket session on the last check Friday.
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