Cannabis companies were mixed on Friday with Valens GroWorks rallying after GMP Securities raised its stock price target after the company’s latest quarterly earnings.
The stock VGWCF, +4.50% was up 6% in afternoon trade, after GMP analyst Martin Landry boosted his price target to $10 from $8 and reiterated his buy rating. Valens’ first-quarter earnings were in line and are mostly immaterial to its earnings power as it remains in the early stages of its growth cycle, he wrote.
But the company’s comments on demand for its extraction services support Landry’s fiscal 2020 forecasts, he wrote in a note to clients, and the company is an ideal partner for potential international consumer packaging companies seeking to source a cannabis-derived product in Canada.
“In our view, partnerships and international expansion are potential catalysts which could cause VGW shares to re-rate higher,” the analyst wrote.
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Valens is aiming to be the biggest third-party vape pen manufacturer and distributor in Canada, and is developing formulations for drinks and edibles, which will become fully legal in Canada in October. Valens announced a new extraction agreement with Hexo Corp. HEXO, +6.69% HEXO, +7.25% on Thursday, bringing its client list to nine, including five of the top 10 players in new sector.
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“Valens expects that extraction demand from this client base could exceed its licensed capacity of 240 tonnes,” said Landry. “To reflect this we are nearly doubling our forecast for FY20 processed volume to 195 tonnes, leaving upside should VGW succeed at using all its capacity.”
Hexo’s Canadian shares added another 7%, bringing that stock’s year-to-date gains to 120%, while the U.S.-listed stock, which trades over the counter, is now up 221% year-to-date.
Aphria Inc. shares APHA, -1.24% APHA, -1.36% fell 1.3%, despite the positive news that it will receive $89 million as part of a breakup fee agreed with Green Growth Brands Inc. GGBXF, +0.30% the U.S. company that made a hostile all-stock bid for Aphria late last year.
“We are pleased to have this resolved in a favorable manner,” Aphria’s interim Chief Executive, Irwin Simon, said in a statement. The two sides had agreed earlier this month to accelerate the expiration and settled on the payment, which comes from Green Growth repurchasing its shares.
Green Growth stock was down 1.6%.
Canopy Growth Corp. CGC, +3.79% WEED, +3.70% co-Chief Executive Mark Zekulin told MarketWatch’s Max Cherney that his top three operational objectives for the company are to scale the business and improve automation, to protect and expand its intellectual property and international expansion. The stock was up 4.1%.
“I think the days where it’s all about the press release about the latest license wherever are over,” he said in a wide-ranging interview. “You know you need a license, that’s the starting point. But that’s sort of table stakes. Right now it’s about, “do you have the teams in the regions, do you have the relationships, do you know what level of GMP certification?”
For more, see: Canopy Growth’s quiet co-CEO on the pot company’s ambitions in the U.S. and more
Aurora Cannabis Inc. shares ACB, -0.39% ACB, -0.45% were flat, after the company said it has entered into a royalty-bearing licensing deal with EnWave Corp. ENW, +10.22% for the exclusive rights to EnWave’s Radiant Energy Vacuum (REV) drying technology. Aurora is making a C$10 million ($7.4 million) investment in EnWave as part of the deal. The technology will be used for the production of cannabis materials in the European Union, excluding Portugal. EnWave stock rose 9.7% on the news.
Imperial Research said Friday that the experience that security company Brink’s Co. is building in Canada could be a boon if the U.S. fully legalizes cannabis at the federal level. Brink’s is currently offering cash and logistics service to Canopy Growth.
Brink’s BCO, +1.56% is not currently serving the U.S. sector, but Chief Executive Doug Pertz told analysts on the company’s earnings call this week that the company supports legislation that would allow banks to work with companies in states that have legalized, as a mater of public safety and policy.
“Were the rules to be changed, Brink’s’ experience in Canada would likely make it an early participant in the movement of cash and product related to cannabis,” analyst Jeff Kessler wrote in a note to clients.
Imperial is expecting the company to generate $20 million to $25 million of revenue from cannabis in Canada in 2019. The stock was up 1.6% on Friday.
In regulatory news, a House subcommittee will discuss three cannabis bills at a hearing next Tuesday that focus on helping military veterans, according to Marijuana Moment, a website that works with activists, industry representatives and policy makers on trends affecting cannabis. The House Veterans’ Affairs Subcommittee on Health will hear testimony on bills that seek to make medical cannabis accessible to veterans suffering from conditions including post-traumatic stress disorder and chronic pain.
“Medical marijuana has shown proven benefits for treating these conditions and denying our veterans access to them is shameful,” Rep. Earl Blumenauer, Dem-Oregon said in a statement last month.
Elsewhere in the sector, Cronos Group Inc. CRON, +3.03% CRON, +3.22% stock was up 2.9%, Tilray Inc. was up 3.1%, and GW Pharmaceuticals PLC GWPH, +4.16% was up 3.4%.
Aleafia Health Inc. ALEF, +1.27% ALEF, +1.27% was up 0.9%. OrganiGram Holdings Inc. OGRMF, -0.98% OGI, -1.02% was down 0.9%.
Medical cannabis retailer MedMen Enterprises Inc. shares MMNFF, +0.34% were u[p 0.5% and Green Organic Dutchman Holdings Ltd. TGOD, +0.48% TGOD, +0.48% was up 1.3%.
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The Horizons Marijuana Life Sciences ETF HMMJ, +1.44% was up 1.3%, and the ETFMG Alternative Harvest ETF MJ, +1.82% was up 1.6%.
Meanwhile, the Dow Jones Industrial Average DJIA, +0.01% was up 0.1%, while the S&P 500 index SPX, +0.17% was up 0.2%.
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Additional reporting by Max Cherney, Tomi Kilgore and Jeremy Owens
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