Piper Jaffray Sees More Upside In Canopy Growth On Geographic, Product Expansion

Canopy Growth Corp CGC kicked off 2019 with a 53-percent run. It hasn’t even begun to strike its high, according to one analyst team.

The Rating

Piper Jaffray analysts Michael Lavery and Jeffrey Kratky maintained an Overweight rating on Canopy Growth and raised their price target from $40 to $60.

The Thesis

Despite cutting ramp forecasts to more conservative rates, Piper Jaffray considers Canopy Growth well positioned in global cannabis — a market expanding into a $250 billion to $500 billion 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 and wellness categories to CBD-infused products,” Lavery and Kratky wrote in a note.

They expect Canopy Growth to rake in $15 billion to $50 billion near term, particularly given recent expansion both in geographic and consumer reach. Last week, the company penetrated the blossoming U.S. market with a New York license. Management plans to invest $100 million to $150 million in a production and processing facility there.

“Canopy has hemp-specific IP, cash reserves, and technical expertise that should position it well in the US hemp and CBD market,” the analysts wrote. “Though we do not yet have more specifics on its plans, we believe this tangible step into the US is a clear positive and makes us more bullish on its outlook for sustainable growth.”

The firm also partnered with Greenhouse Juice Company to add cannabidiol-infused beverages to its portfolio. At the very least, the arrangement expands visibility in Canada.