CIBC Initiates Coverage On Cannabis Stocks, Sees Bright Future Ahead

Cannabis investors may be witnessing the rare birth of an entirely new industry, and one Wall Street analyst said Friday three companies will emerge as the leaders of the new cannabis market.

The Analyst

CIBC analyst John Zamparo initiated coverage of the following three cannabis stocks:

• Canopy Growth Corp CGC initiated at Outperformer with a $65 price target.
• Cronos Group Inc CRON initiated at Outperformer with a $22 price target.
• Aphria Inc APHA initiated at Neutral with a $10 price target.

The Thesis

Typically, when a new industry emerges, such as the airline industry or the internet, a handful of companies ultimately end up dominating the lion’s share of the market. Zamparo said the cannabis market will be no different, and Canopy and Cronos are well-positioned to be among the handful of long-term winners. In addition to the companies’ businesses, he said the vision and execution of their management teams are most impressive.

“Our view is that the strategies deployed by these companies combined with their strong balance sheets make these companies the most likely to attain the status of industry titan,” Zamparo wrote in a note.

He said his bullish thesis on the management teams of these two companies has been reinforced by major outside investments from companies like Constellation Brands, Inc. STZ and Altria Group Inc MO.

He said Aphria’s manufacturing and automation expertise is also impressive, but the company’s corporate governance and capital allocation may keep some investors at arm’s length.

Price Action

Here’s how the three cannabis stocks were trading Friday following the bullish commentary from CIBC:

• Aphria was up 1 percent to $6.55.
• Cronos was up 9.7 percent to $14.99.
• Canopy Growth was up 3.4 percent to $44.16.

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