Cowen: Constellation Brands Stakeholders Have Reason To Be Confident In Canopy Growth

Cowen is taking a more constructive view on Canopy Growth Corp. CGC's early lead in the cannabis industry after a meeting with the marijuana company's management.

The Analyst

Cowen analyst Vivien Azer maintained an Outperform rating on Canopy Growth's Canadian stock and raised the price target from the U.S. dollar equivalent of $42.48 to $56.13.

The Thesis

The key question from investors in Constellation Brands, Inc. STZ — which just invested $4 billion in Canopy Growth — revolves around the probability that the company's opportunities will materialize, Azer said in a Tuesday note. (See the analyst's track record here.) 

Cowen remains confident in Canopy's revenue-generating ability for the following reasons, she said: 

• A dominant share of supply agreements with a diverse production footprint. 
• A targeted consumer portfolio with a specific revenue management approach that focuses on high-consumption cannabis users.
• A multipronged retail strategy that reflects exposure to over 50 percent of the Canadian adult population.
• A strong and diverse brand portfolio with solid recognition.
• The Canopy Health medical engine.

“WEED is making significant progress in its Canopy Health segment toward developing cannabis-based formulations, including 15 clinical trials and 39 U.S. patent applications,” Azer said.

"WEED" is Canopy's ticker on the Toronto Stock Exchange. 

“We believe that as the largest manufacturer, WEED is well-positioned to benefit from the growing medical cannabis industry in Canada, particularly given advantages in capacity, distribution, branding and revenue/category management."

Cowen predicts Canopy Growth will hold the leading position in Canada's adult use market, which the sell-side firm estimates could grow to the U.S. dollar equivalent of $9.1 billion by 2025, including medical marijuana. 

Price Action

Canopy Growth's U.S.-traded shares were rallying 9.29 percent to $65.22 at the time of publication Tuesday. 

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