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Benchmark analyst calls for CA$100 price target for Canopy Growth following blockbuster cross-border deal with Acreage Holdings

Canopy Growth Corporation’s (CGC) recent deal to purchase Acreage Holdings (ACRGF) pending the legalization of cannabis in the U.S. sent shockwaves through the industry earlier this week, for its brazenness as much as for its $3.4 billion price tag. The deal appears to be paying off, however, with Benchmark analyst Mike Hickey writing an investor note that keeps a ‘Buy’ rating on the company with an impressive CA$100 ($74.44) price target.

Hickey writes that the deal is a clear path into the U.S. market for Canopy, which he expects to be valued at 10 times higher than the whole of the Canadian cannabis market.

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When it comes to what the deal means right now, Bruce Linton told Bloomberg in an interview recently that it would be about brands, among other things. “I would expect there will become Tweed stores as trademarked brands in the U.S.,” he said.

The whole process will be an “evolution” he went on to say. In the meantime, because of the federal prohibition of cannabis in the U.S., Canopy will not be able to have any governing power over Acreage whatsoever.

Still, Linton was confident that legalization need not be a precursor to cross-border deals at this time.

According to Hickey, investors should look out for a slowdown in sales in Canada for Q1, and that revenue for Q4 may come in lower than expected. In his note, he wrote that Canopy should report earnings of CA$93 million ($69.22 million), which is just short of the CA$98 million ($72.94 million) most other analysts predict.

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Canopy closed out the day at $47.41 per share on the New York Stock Exchange, down 1.74 percent from the previous day’s close.

(Canadian cannabis giant Canopy Growth is close to a deal to purchase Acreage Holdings. CNBC's Melissa Lee reports.)
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