With Canada rolling out the red carpet for cannabis, a handful of pot stocks have emerged as potential winners in the eyes of Wall Street and investors. None more so than Canopy Growth (CGC), which is currently the world’s largest marijuana stock at a valuation of nearly $17 billion.
Investors are clearly excited about what the postlegalization environment in Canada and ongoing state-level legalizations in the U.S. might bring for 2019 and beyond. Arcview Market Research and BDS Analytics is calling for 38% global legal weed sales growth in 2019 to $16.9 billion. Further, worldwide sales are expected to climb to $31.3 billion by 2022, signaling that growth isn’t set to slow anytime soon.
With that in mind, Piper Jaffray analyst Michael Lavery pounds the table on shares of Canopy Growth, reiterating an Overweight rating, while raising the price target to $60 (from $40), which represents a potential upside of 21% from where the stock is currently trading.
Lavery noted, “We continue to estimate a $250-500B potential long-term global cannabis market, with a $15-50B near-term opportunity. We believe the long-term growth can be significant – both from transitioning illicit trade to legal sales, medical sales, and from transitioning sales in health & wellness categories to CBD-infused products. We believe Canopy is well-positioned in the growing cannabis market. We consider its recent approval of a New York hemp license to be a tangible first step forward in the US that points to the beginning of a long US growth trajectory.”
“Our US$60 price target is based on an ~18x EV/sales multiple (~11x prior) on our C20E sales of US$940M, below its current ~22x multiple on our C19E sales and slightly below the 18.8x peer average multiple of high sales growth companies (over 100%) with over $1B in market cap. We increase our multiple given greater visibility on the US launch,” the analyst added.
As usual, we recommend taking analyst notes with a grain of salt. According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, Lavery has a yearly average loss of 2.3% and a 43% success rate. Lavery is ranked #3977 out of 5144 analysts. (To find more details, click here)
Overall, this cannabis player stands as a ‘Strong Buy’ name among Wall Street analysts. In the last three months, CGC has won five bullish recommendations. With a return potential of 20%, the stock’s consensus price target lands at $60. (See CGC’s price targets and analyst ratings on TipRanks)