Canadian cannabis company Canopy Growth Corp.'s shares slid 1.5% Friday, after Bank of America Merrill Lynch downgraded the stock to neutral from buy and said Wall Street expectations for it are "far too high." Analysts Christopher Carey and Lisa Lewandowski cut their stock price target to $27, compared with its current price of $24.40. "To be clear, we still see Canopy as a long-term leader in an industry with a large and growing Total Addressable Market, increasingly accessible as jurisdictions legalize cannabis," the pair wrote in a note to clients. "The issue? Canada industry growth is set to pause in the second half, potentially flattening, a trend we think could also be the case with Canopy; and yet, the Street is modeling strong double-digit sales growth quarter-on-quarter." Data shows there is 3 and a half months of flower inventory in the channel in Canada and eight and a half months of oil. With stores reporting sluggish growth, that inventory will likely take time to come down, especially as Canadian provinces prep for the launch of derivative products in Decemberm said the note. "Policy wins, like SAFE passing the US Senate, and any positive take on a newly announced CEO by CY-end, would also help sentiment," they wrote, referring to the banking bill that was approved by the House this week but is expected to meet resistance in the Senate. Canopy shares have fallen 9% in 2019, while the ETFMG Alternative Harvest ETF has fallen 13% and the S&P 500 has gained 18%. Read More...
Canadian cannabis company Canopy Growth Corp.’s shares slid 1.5% Friday, after Bank of America Merrill Lynch downgraded the stock to neutral from buy and said Wall Street expectations for it are “far too high.” Analysts Christopher Carey and Lisa Lewandowski cut their stock price target to $27, compared with its current price of $24.40. “To be clear, we still see Canopy as a long-term leader in an industry with a large and growing Total Addressable Market, increasingly accessible as jurisdictions legalize cannabis,” the pair wrote in a note to clients. “The issue? Canada industry growth is set to pause in the second half, potentially flattening, a trend we think could also be the case with Canopy; and yet, the Street is modeling strong double-digit sales growth quarter-on-quarter.” Data shows there is 3 and a half months of flower inventory in the channel in Canada and eight and a half months of oil. With stores reporting sluggish growth, that inventory will likely take time to come down, especially as Canadian provinces prep for the launch of derivative products in Decemberm said the note. “Policy wins, like SAFE passing the US Senate, and any positive take on a newly announced CEO by CY-end, would also help sentiment,” they wrote, referring to the banking bill that was approved by the House this week but is expected to meet resistance in the Senate. Canopy shares have fallen 9% in 2019, while the ETFMG Alternative Harvest ETF has fallen 13% and the S&P 500 has gained 18%.
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