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Bay Street, Wall Street bullish on Canopy as company enters US hemp market

By Brandon A. Dorfman
Jan 18, 2019

CIBC initiated coverage of Canopy Growth Corporation this week with an outperformer rating and a price target of CA$65 ($49.09). In fact, analyst John Zamparo likened the cannabis industry to the gold rush, stating that these were “boom times” akin to the invention of the automobile or the internet, according to a report in Bloomberg. However, while Zamparo expects investor capital to pour into the sector, like many, he predicts very few winners will be left standing in the end.

"Dozens of small/medium-sized firms will likely earn moderate revenues and earnings," wrote analyst John Zamparo, according to Bloomberg, "but only a handful will come to dominate the global market."

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Like many before him, he considers Canopy to be one of the best buys in the marijuana stock market today. “[Canopy is] incredibly well-capitalized and well-managed with a reasonable likelihood of obtaining a market-leading position domestically, with a good head start on operations internationally,” he wrote.

“[It is the] best-capitalized in the space, with few limits on what it chooses to buy and build, he continued."

Canopy Growth best way to play Canadian cannabis from CNBC.

Canopy Growth to enter US hemp market in New York

Meanwhile, Canopy Growth also plans to enter the U.S. hemp market and announced recently that the company received a hemp license in New York state. It marks their first foray into the U.S. cannabis industry.

“The license will allow Canopy to process and produce hemp in the state where the company plans to commit US$100M to US$150M of capital to build out a hemp industrial park,” wrote Canaccord Genuity cannabis analysts Bobby Burleson and Matt Bottomley in a recent note to investors. “State and Federal legislators have seemingly welcomed Canopy into the US with open arms with US Senator Chuck Schumer indicating that he would like to see the Southern Tier region of upstate New York (where Canopy will construct its operations) become the “Silicon Valley” of industrial hemp production."

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Burleson and Bottomley have placed a Speculative Buy rating on the company, with a price target of CA$50 ($37.76).

According to the investor note, Canopy’s move into the U.S. hemp market will increase their potential market. “we believe hemp-based nutraceutical products (topicals, creams, oils, etc.) have a number of health & wellness applications that are not necessarily served by existing cannabis retailers,” the analysts wrote.

Along with their status as the first large-cap Canadian Licensed Producer to enter the U.S. hemp market, Burleson and Bottomley cite the Constellation Brands investment as evidence for their rating. They echo the popular sentiment of analysts such as Jim Cramer who has called Canopy Growth the only play in the cannabis industry at this time.

"Even with Altria investing in Cronos, I believe that Canopy Growth remains the best way to play the Canadian cannabis market," Cramer, who hosts the show “Mad Money,” said in December.

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