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Canopy Growth Corp. is looking “frothy” says M Partners

TerrAscend

TerrAscendCanopy Growth Corp. (Canopy Growth Corp. Stock Quote, Chart, News: TSX:CGC) has clearly emerged as a leader in the medical marijuana space but an extremely strong uptick in the company’s share price means it valuation is getting toppy, says M Partners analyst Mason Brown.

In a research update to clients today, Brown maintained his one-year price target of $5.80 on Canopy Growth Corp., but lowered his rating on the stock from “Buy” to “Hold”.

Brown explains that he thinks Canopy will ultimately be one of the winners in the space and says current investors should hold onto their stock.

“We believe investors should continue to hold CGC given our long-term outlook of the company being a dominant player in the dual medical + recreational cannabis market, opportunities for strategic international transactions (export agreements, equity ownerships, JVs), and significant expansion capacity at its multiple facilities,” says the analyst. “Nothing has changed fundamentally over the past 1.5 months that would have us revise our estimates; however, we believe CGC’s valuation looks frothy when taking into account a reasonable investment horizon. Our valuation methodology applies an EV/adj. EBITDA multiple to a CY2020E adj. EBITDA estimate and discounts the market value per share back at 15.0%/year. We use a CY2020E adj. EBITDA estimate as we believe 2.5 years of a rec-legal market better captures the opportunity ahead of the Canadian MMJ companies while remaining within a sensible investment horizon.”

Brown believes Canopy will generate EBITDA of $600,000 on revenue of $39.4-million in fiscal 2017. He expects those numbers will improve to EBITDA of $10.5-million on a topline 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.
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Comment

  1. I’m up 90% on my stock per today’s drop, made a good $3500 so far, keep going green rush! Make me rich!

  2. California is polling 60% in favor of approving regulated re-legalization.This stock is highly likely to go parabolic in November. Americans just do not trade like the Canuckistanis. We don’t have very much in the way of impulse control, a deeply seated suspicion of securities with very low prices and not very many publicly traded companies in the space to choose from.

  3. There’s no way is dropping that far. If you didn’t get a bunch of shares back then you’re stuck.

  4. It seems to do that every Friday. All weed stocks seem to. Which is fine, other days gains off set that.

  5. No chance. They own 50% of the Canadian market and are about to release three Snoop Dogg strains.

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  8. It’s great to see the Cannabis industry booming. All the time, more and more people are realizing the amazing benefits of this amazing plant!!!

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