Analyst initiates bullish coverage of Canopy as shareholders approve Constellation deal
On Wednesday Canopy Growth Corporation (TSX:WEED) (NYSE:CGC) shareholders approved the much ballyhooed CAD$5 billion investment by beverage giant Constellation Brands, which comes in the form of a private placement of 104,500,000 common shares and 139,745,453 common share purchase warrants. Nearly 95 percent of the approximately 40 percent of common shares represented at the meeting voted for the resolution, meaning it was approved according to all of the necessary rules and regulations of the Toronto Stock Exchange as well as other governing bodies.
"We've established a leadership position in this industry by pushing the boundaries and executing in unchartered markets. With shareholders aligned on our vision of the future we'll get to work deploying capital and creating even more value for the hundreds of thousands of people who trust us with their hard-earned money," said Bruce Linton, Chairman and Co-CEO of Canopy Growth in a statement. "I would like to thank our shareholders for their support and for approving a landmark investment in our business."
The transaction is expected to close on or about October 31, upon which time new directors will be appointed as nominated by CBG. Deloitte LLP, Chartered Accountants have been appointed as the companies auditors as well.
Benchmark targets Canopy at CAD$100 per share
Benchmark analyst Mike Hickey initiated coverage on Canopy in recent days, labeling the company a buy and placing a target price of CAD$100 per share on them, sending stock prices upward in over the past couple of days. While Hickey was high on Canopy’s industry leadership, along with the pending legalization of cannabis in Canada, the Constellation buy-in sealed the deal for him.
“We estimate that the Canadian cannabis market could reach [$3.16 billion] in 2019, while expanding 156 percent to an estimated [$8.1 billion] by 2023," said Hickey. "We expect Canopy to maintain a material share of the Canadian cannabis market based on initial supply agreements and an early mover advantage in creating national brands and products across a broad category range including beverages.”
Benchmark sees Canopy’s overall global opportunity as exceeding $200 billion over the next decade and beyond. Furthermore, Hickey sees a better than good chance that Constellation is looking for more than just a partnership.
“We believe Constellation could acquire Canopy, the perceived possibility of which should provide valuation support for the stock.”
Hickey’s track record can be found here.