Analyst: Acreage Deal Part Of Canopy Growth's 'One Step Ahead' Mentality

Canopy Growth Corp CGC recently announced a deal to acquire U.S. cannabis company Acreage Holdings Inc ACRGF that is contingent on U.S. federal legalization of marijuana. On Friday, one analyst said Acreage will be a key part of Canopy’s long-term U.S. strategy.

The Analyst

Bank of America analyst Christopher Carey reiterated his Buy rating and $80 price target for Canopy.

The Thesis

Carey recently met with management from Acreage to discuss the deal with Canopy and what it means for the company’s U.S. strategy. Shareholders from both companies will vote to approve the deal in a special meeting scheduled for June 19. If the deal is approved, Canopy will pay $300 million in cash to Acreage for the exclusive right to acquire the company if and when the U.S. ultimately legalizes cannabis nationwide.

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Acreage management said they anticipate the Canopy deal will easily be approved by shareholders. They also suggested the company could soon step up its acquisition strategy once the deal is approved by shareholders and regulators.

Carey said the Acreage deal is just one example of the type of bold strategy that Canopy is utilizing to solidify its position as an early market leader in a fledgling cannabis business.

“While a large cultivator, CGC is laying groundwork to excel in other areas higher on the value chain, driven by a ‘one step ahead’ mentality,” Carey wrote in a note.

In addition to locking down a major U.S. retail presence in Acreage, Canopy is also pursuing federally legal compounds, such as CBD, and had additional opportunities in the U.S. market from FDA-approved drugs and other tangential cannabis-related products.

Price Action

Canopy stock traded higher by 1 percent to $41.80 per share on Friday.

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