So far this year, the cannabis sector has continued to see strong momentum and has shown no signs of slowing down. The positive trend started after Joe Biden was elected to be the next president of the United States (US).
One of the biggest catalysts for the sector was the outcome of Georgia’s runoff election for two senate seats. After the democratic party won both senate seats, the political party took control of the Senate and the outcome surprised the market.
By winning these two seats, the democratic party will have a majority in both the senate and the house of representatives. We believe this is beneficial for the cannabis industry and expect to see decriminalization legislation get passed in the near future.
Based on this belief, the cannabis sector has been trending to the upside so far this year as banks have become more favorable on the potential of the industry. Although Canadian cannabis companies have been some of the greatest beneficiaries of the political changes in the US, these operators are levered to the US market and believe this has played an important role in the recent rally.
Today, we want to highlight 3 Canadian cannabis producers that have benefited from the developments in the US and have received several upgrades over the last month. We believe the cannabis industry is in the middle of a major growth cycle and these are operators that we are closely following.
Last month, Aphria (APHA.TO) (APHA) and Tilray Inc. (TLRY) announced a merger agreement and the market has responded very favorably to the development. Both Canadian cannabis company have been the subject of several rating and price target changes and we will continue to monitor the trend. Below we have highlighted the recent changes on Aphria:
- January 19th: Stifel raised the price target to $15.50 from $9.80 (CAD)
- January 15th: Cantor Fitzgerald raised the price target to $26 from $15.25(CAD)
- January 15th: Alliance Global Partners raised the price target to $20 from $12 (CAD)
- January 15th: CIBC raised the price target to $18 from $12.50(CAD)
- January 15th: Haywood Securities raised the price target to $14 from $12.25 (CAD)
- January 15th: BMO raised the price target to $15 from $7 (CAD)
- January 14th: Canaccord Genuity raised the price target to $17.50 from $11 (CAD)
- December 18th: Cormark Securities raised its price target to $10.75 from $8 (CAD)
When compared to Aphria, Tilray has not seen nearly as many upgrades from broker-dealers and this is a trend to be aware of. We believe that Tilray’s recent rally has analysts scratching their heads when it comes to valuing the combined company. Once the merger is completed, the combined company will have significant leverage to the Canadian and international cannabis market.
- January 15th: Cantor Fitzgerald raised the price target to $24 from $11 (USD)
- December 17th: Stifel went from Sell to Hold and raised the price target to $9.20 from $5
HEXO Corporation (HEXO.TO) (HEXO) has been a major beneficiary of the increased interest in Canadian cannabis stocks and benefited from its relationship with Molson Coors (TAP.CN). HEXO recently conduct a 4 for 1 reverse split and the price targets below reflect the split:
- December 16th: Stifel raised the price target to $5.60 from $2.40 (CAD)
- December 15th: MKM Partners raised the price target to $5.20 from $4.00 (CAD)
- December 14th: ATB Capital raised the price target to $4.80 from $3.40 (CAD)
- December 14th: Canaccord Genuity raised the price target to $5 from $4 (CAD)