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Canopy Growth Corp. is undervalued, says M Partners

Canopy Growth
Canopy Growth
Canopy Growth Corp. (formerly known as Tweed Marijuana) inked a deal earlier this year.

Canopy Growth Corp. (Canopy Growth Corp. Stock Quote, Chart, News: TSX:CGC) has separated itself from the pack as one of the early leaders in the Canadian medical marijuana space, but M Partners analyst Mason Brown thinks there is still upside in the stock.

In a research report to clients today, M Partners resumed coverage of Canopy with a “Buy” rating and a one-year price target of $5.80, implying a return of 52 per cent at the time of publication.

Brown believes the early leadership role Canopy has forged will soon translate to broad-based success.

“We view CGC as a structural winner in the Canadian marijuana market,” says the analyst. “Since reaching the market leader position, it has steadily held and gradually grown its control of the medical market through its brand reputation, extensive product offering, and patient outreach programs. Once the recreational market begins (we estimate a $7.1B med+rec market by YE2024), we believe CGC can extend its control to the rec market (10% market share by 2020) by leveraging its medical leadership status, expertise, and financial strength. CGC has already begun to assert itself on the global stage by executing on strategic international transactions via providing advisory services, acquiring equity ownership positions, and entering JVs. Targeting countries with nascent legal medical markets and that have a route to recreational access, CGC is looking to set itself up to be a significant player. Lead by strong management with extensive industry and transactional experience, Canopy is well positioned to become a leader in the Canadian market and a principal player in the international market as well.”

Brown thinks Canopy will generate Adjusted EBITDA of $600,000 on revenue of $39.4-million in fiscal 2017, numbers he expects will climb to EBITDA of $10.5-million on revenue of $67.3-million the following year.

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About The Author /

Nick Waddell
Cantech Letter founder and editor Nick Waddell has lived in five Canadian provinces and is proud of his country's often overlooked contributions to the world of science and technology. Waddell takes a regular shift on the Canadian media circuit, making appearances on CTV, CBC and BNN, and contributing to publications such as Canadian Business and Business Insider.

Comment

  1. Numbers seem rebased on a hypothesis that marijuana will be legal recreationally extremely fast, no selling restrictions and that the company will invest massively in new grow rooms? Don’t know about you guys but politicians seem slow and construction of new rooms take time. The one year price target is extremely optimistic and The revenu is mainly capped by the legal quantity they are allowed to sell. I’m long canopy since it was at 2$.. i hope the government thinks of a good way to legalize it this upcoming spring.. for the sake of the entire world.

  2. Not really Mike, the fact is there is 40% revenue growth per quarter since inception and that amounts to doubling revenues every 6 months. This revenue can be based just on medical cannabis alone. However, I am in agreement that legalization unless partial roll out figures to be held off by most estimates to 2018. Many of the rooms for already built out fully at Tweed Farms at 375k square feet, Bedrocan has 55k and another facility on the way along with Hershey Factory which is expected to continue retro-fitting along to its capacity of 170k square feet. Much of the infrastructure is in place certainly for the revenues quoted in this projection but also somewhat on the expected revenues during legalization onset. That revenue at 20% market share that is currently exceeded by Canopy would be at least one billion per year via minimum estimates of a current illegal market for cannabis at 5 billion per year. Much more to come. An article from Jan. that looks ahead a bit found here. http://www.nasdaq.com/article/canopy-growth-corp-leads-the-way-towards-the-legalized-mj-market-in-canada-cm561347

  3. First time stock investor , question is how high can cgc go , I under stand there are limited sales , answer if you can help Thanks

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