A site visit to Canopy Growth Corp’s (TSX:WEED) B.C. Tweed facilities has GMP Securities analyst Martin Landry continuing to feel bullish about the stock.
Recently, Landry visited the company’s Aldergrove facility, which received its cultivation license on February 16, covering 10 of the 30 acres of its entirety, and the nearby Delta facility, which is comprised of 40 acres of greenhouse and is currently undergoing a conversion process. It is expected to get its license before the summer.
The analyst notes that combined, the two facilities are expected to generate more than 150 tonnes of product, and offers that despite being approximately two decades old the greenhouses appear to be in great shape.
In a research update to clients today, Landry maintained his “Buy” rating and one-year price target of $40.00 on Canopy Growth Corp. a price that implied a return of 18.8 per cent over Monday’s closing price of $33.68. Landry say the stock continues to trade at a discount.
“Our visit of BC Tweed provides visibility on the company’s largest expansion project,” the analyst explains. “What we have seen is reassuring as the company seems to be on target to have full production for both locations this summer. This provides visibility on our production forecasts and hence to a certain extent, our sales forecasts. Overall we come back from the site visit impressed by the ability of the team to rapidly convert and scale-up production. In our view, WEED’s discount of 12% to peers on CY19 EBITDA is not justified and provides investors with an appealing entry point into the leading cannabis company globally. Our target is based on a DCF using: 1) an 8% discount rate, 2) a 25% share of the recreational market in Canada, and 3) a 31% EBITDA margin.”