Legalization should lift all cannabis stocks, says Canaccord Genuity

Canaccord Genuity analyst Neil Maruoka says that although the legalization of marijuana in Canada was widely expected, the news that it will indeed finally happen brings welcome certainty to the space.

Yesterday, the CBC reported that the Liberal government will next month announce that it will legalize marijuana in Canada by July 1, 2018. The CBC’s David Cochrane said parliamentary secretary to the minister of justice Bill Blair briefed the Liberal caucus on the new legislation over the weekend.

Maruoka says the development moves the sector forward.

“Although this legislation has been widely anticipated, we nonetheless believe that it provides investors with a greater degree of clarity and certainty of what the recreational market could look like, and so its introduction into the House of Commons should be viewed as a significant positive industry catalyst,” he said in a research update to clients this morning.

The Canaccord Genuity analyst says that although the news should benefit all cannabis stocks investors should look at the particulars of each individual stock for specific catalysts.

“Going into next month, we believe this legislation should be the tide that raises all stocks. However, we would be cautious that investors could also use this as an opportunity to take profits,” he says. “As we had highlighted in our initiation from two weeks ago, we believe that once this legislation is tabled there will likely be a lack of positive industry catalysts over the next year or so; that is why we recommend investors look for companies with differentiated strategies and stock-specific catalysts.”

Maruoka says his top pick in the space remains Aurora Cannabis (TSXV:ACB), which he has a “Speculative Buy” rating and a one-year price target of $3.15 on.