With the stock down more than 40 per cent since its January peak, GMP Securities analyst Martin Landry says its time to buy Canopy Growth Corp. (TSX:WEED).
In a research report to clients Monday, GMP Securities issued its quarterly collection of its highest conviction recommendations, called “GMP’s Best Ideas”. The list features investment ideas in Mining, Energy, Financial Services and Real Estate, Industrials and Diversified, and Technology and Healthcare.
Under the final section, Canopy is a new entry. Landry says he expects WEED will lead the recreational marijuana market.
“In our view, the Canadian recreational market may face an inventory shortage at the onset given the significant rise in demand and expected limited product availability,” the analyst explains. “Canopy appears well prepared with a large inventory of ~18 tonnes of cannabis or cannabis equivalent, which amounts to 45% of the total industry-wide inventory as of December 31st according to industry data published by Health Canada. Hence, we believe that Canopy could take advantage of the expected shortage to gain shelf space and grow awareness for its products.”
Landry today reiterated his “Buy” rating and one-year price target of $40.00 on Canopy Growth Corp., implying a return of 55.4 per cent at the time of publication.
Landry thinks Canopy will generate EBITDA of negative $20.7-million on revenue of $78.1-million in fiscal 2018. He expects those numbers will improve to EBITDA of positive $69.3-million on a topline of $376.9-million the following year.
Landry says there are several potential catalysts for Canopy’s stock, including the possibility of a U.S. listing and the receipt of a sales license at its B.C. Tweed facility.