In a research update to clients Thursday, Maruoka maintained his “Hold” rating but raised his one-year price target on Canopy from $26.00 to $26.50, implying a return of 17.8 per cent at the time of publication.
Maruoka say the recent news that the tender process for domestic cultivation licenses in Germany -of which WEED is a candidate- has caused him to slightly revise his assumptions about the company. He is now pushing out the timing of domestic sales in Germany to 2020 instead of 2019, he has decreaed his assumption about the German markets share by 100 basis points for each producer, and has decreased the probability of success in getting a German license to 50 per cent, from his previous 75 per cent.
But in the same report the analyst said another positive has offset this development for him.
“As a result of the three adjustments made to our model we have decreased our international valuation for Canopy by ~$0.68 per share,” Maruoka explains. “However, as a result of commentary made by strategic investor Constellation Brands during its Q4 earnings call on Thursday (which include plans to build brands and open new markets in the cannabis space in support of its long-term strategy to stay ahead of evolving consumer trends), we have decreased our recreational discount rate for Canopy by 100bps (from 11% to 10%).”
On Wednesday, Düsseldorf’s Higher Regional Court ruled to stop the tendering process for marijuana for medical purposes in Germany. The move followed on a tender document released by Germany’s Federal Agency for Medicines and Medicinal Products that envisioned supply of 6600 kilograms by 2022. Germans can get cannabis by prescription, but the supply is imported. Judge Heinz-Peter Dicks said the tendering process had been rushed.