Canopy Growth Corp (NYSE: CGC) is having a strong start to the trading session in the pre-market hours this morning, and for good reason. The company is the center of attention after the top Wall Street analyst on cannabis weighs in on the sector and another highly trusted analyst weighs in on the stock in particular. The comments were positive, exciting investors and sending the stock on a run for the top. Today, we’ll talk about:
- The analyst updates;
- why CGC has a competitive advantage;
- what we’re seeing from the stock; and
- what we’ll be watching for ahead.
Cowen Weighs In On Cannabis And CGC
The strong movement in Canopy Growth Corporation started in after-hours trading yesterday, shortly after Cowen analyst, Vivien Azer updated her expectations with regard to the cannabis industry. In a note, the analyst said that the cannabis industry is expected to reach a value of $80 billion in the United State by 2030, should the region fully legalize the plant on a federal level. The analyst also said that it expects that Tilray (TLRY) will be a prime beneficiary of a more stable adult use market in Canada. As a result, she is expecting revenue gains there.
Shortly following the Cowen report, Piper Jaffray analyst, Michael Lavery released a note, initiating coverage on CGC. In the note, the firm gave the stock a rating of overweight with a price target of $40.The strong expectations come from expectations of increasing sales growth driven by strong sustainable category momentum. Lavery specifically pointed to advantages that the company has in relation to beverage partnerships, capacity advantages, and a balance sheet position that will give it a boost in the near term. The analyst also said that the clinical trials and intellectual property that the company is building will help it to add competitive advantages in the long term.
Advantages In CBD
CBD is a hot topic as of late. After all, the United States recently legalized the substance through the Farm Bill. Yesterday, CGC issued a press release outlining their advantages in the industry. In particular, the company wanted to provide an update with regard to their activities in the hemp market as they work torward an entry into the United States market.
Canopy Growth said that in 2016, it started to add strategic hemp assets to its portfolio, with a focus on consumer-packaged goods. From there, the company started investing in field-scale operations in late 2017 with a goal of vertically integrating its hemp business to miror its existing cannabis business. This proved to pay off as the company has a strong footprint in the hemp space, giving CGC the opportunity to take advantage of the changing tides in the United States.
In a statement, Bruce Linton, Chairman and Co-CEO at CGC, had the following to offer:
Canopy has been preparing for and investing in this opportunity for several years now, through strategic acquisitions, infrastructure expansion, and extensive internal research and development… With the door now open, we are moving fast to bring our considerable resources to establish the same market leadership position internationally that we have earned in the Canadian cannabis market. Canopy has a strong supply of CBD, a significant channel presence, the IP to drive the CBD industry forward to the benefit of consumers, and the balance sheet needed to act now.
What We’re Seeing From The Stock
One of the first lessons that we learn when we start to work in the market is that the news leads to moves. When it comes to Canopy Growth, the news has been overwhelmingly positive. With analysts weighing in with strong positive opinions and the company outlining its CBD business and its goals of beginning operations in the United States, it only makes sense that investors are excitedly pushing the stock on a run for the top. As is normally the case, our partners at Trade Ideas were the first to alert us to the gains. Currently (7:42), CGC is trading at $30.90 per share after a gain of $1.26 per share or 4.25% thus far today.
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What We’ll Be Watching For Ahead
Moving forward, the CNA Finance team will continue to keep a close eye on CGC. In particular, we’re interested in following the story surrounding the company’s continued work, not only to take advantage of the adult use market in Canada, but also to take advantage of the changing tides in the United States. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
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