Canopy Growth Corp gets new $70.00 price target at GMP Securities

Canopy Growth Corp’s (Canopy Growth Corp Stock Quote, Chart TSX:WEED, NYSE:CGC) entrance into the US hemp market has spurred analyst Martin Landry of GMP Securities to double his international sales forecasts for the cannabis company while upping his target price, reaffirming his “Buy” recommendation with the new target of $70.00 (previously $50.00).

Yesterday, shares of Canopy Growth jumped 11 per cent on news that the company had been granted a license to grow hemp in the state of New York. Canopy says that it is in the process of evaluating a number of sites in the Southern Tier of New York and intends investing between US$100 million and US$150 million in its operations.

“Canopy Growth was founded to drive innovation within the cannabis and hemp industries. In New York we see an opportunity to create products that improve people’s lives,” said Bruce Linton, Chairman and co-CEO, in a press release. “In the process, we will create jobs in an exciting, highly profitable new industry. I applaud the political leadership at the federal and state level that has allowed today’s announcement to become reality.”

Landry says that while still in its formative period, the market for hemp-related products is likely to be massive.

“It is difficult to assess the potential market for CBD-based consumer products given that CBD was just recently de-scheduled by the DEA. However, this extract found in the cannabis plant and also in hemp generates significant hype,” he said in an equity research update on Tuesday. “Anecdotal evidence suggests that CBD extracts could find their way into sports recovery drinks, energy drinks, functional water, topical creams and food supplements. We estimate these product categories in the US amount to a combined market size of ~US$50 billion. Therefore, a minor penetration into these product categories could be material for WEED.”

Landry’s forecast is that with the help of investor Constellation Brands and its distribution reach, Canopy, which began adding strategic hemp assets to its portfolio starting in 2016, should have CBD-based products across the US by 2020.

The analyst has made no changes to his revenue and EBITDA forecasts for Canopy for the years 2019 and 2020. His new target price represented a projected return of 24 per cent at the time of publication.