PI raises price targets on Aphria, Mettrum, Emblem and OrganiGram

Following the release of the final task force report on cannabis legalization, PI analyst Jason Zandberg is feeling bullish about Canada’s marijuana sector.

In a research report to clients today, Zandberg raised his price target on four of the five marijuana stocks he covers. The analyst raised his price target on Aphria Inc. (Aphria Stock Quote, Chart, News: TSXV:APH) to $5.50 from his previous target of $4.25. He raised his target on OrganiGram Holdings Inc. (OrganiGram Stock Quote, Chart, News: TSXV:OGI) to $4.50 from $2.45. His target on Emblem Corp. (Emblem Corp. Stock Quote, Chart, News: TSXV:EMC) was lifted to $3.50 from $3.25 and his one-year target on Mettrum Health Inc. (Mettrum Health Stock Quote, Chart, News: TSXV:MT) is now $9.25 instead of $8.00.

Zandberg rates all of these stocks as “Buys” with Speculative risk. He notes he is currently RESTRICTED on Canopy Growth Corp. (Canopy Growth Corp. Stock Quote, Chart, News: TSX:CGC).

The task force report is intended to set a framework for legalization and regulation of cannabis in Canada. The nine person panel was chaired by former Liberal minister Anne McLellan. Among its many recommendations are setting a minimum age of 18 to purchase cannabis, to ensure that sales are not conducted near schools or alcohol, to restrict advertising and promotion, to limit personal possession to 30 grams, and to prevent more potent strains from hitting the market.

The panel’s recommendations were generally well received.

“For the most part, the task force has produced a workable, sensible framework for the sweeping changes that the birth of legalized cannabis will bring to Canada’s health and justice systems, not to mention its retail and food and drink sectors,” wrote the National Post’s John Ivison today. “This government has shelved major reports it didn’t like in the past — last April, it ignored the most contentious findings of a parliamentary committee report into assisted dying. But the McLellan task force has produced solid recommendations that are unlikely to suffer a similar fate.”
Zandberg says the overall impact of the news was positive for Licensed Producers.

“We believe the recommendations were positive for the most part, as it pertains to licensed MMJ producers,” he says. “The direct mail-order system will allow LPs to maximize gross margins (no middle man) especially in the initial phases of the recreational roll-out as Provinces take time to coordinate retail outlets. The minimum age was unexpected and increases the potential market size. Advertising limitations represent the only negative surprise among the task force recommendations.”