Canopy's U.S. Hemp Foray Will Attract U.S. Investors, GMP Says

(Bloomberg) -- Canopy’s hemp license in New York State and its plan to build an extraction and manufacturing facility will make it more appealing to investors looking for exposure to the U.S. cannabis market, GMP analyst Martin Landry writes in a note, raising his price target to C$70 from C$50.

  • Landry, who rates Canopy a buy, notes that it’s difficult to assess the potential market for CBD-based consumer products, but believes it could amount to a combined U.S. market size of $50 billion; "therefore, a minor penetration into these product categories could be material" for Canopy
    • Says Canopy could have CBD-based products across the U.S. by 2020, leveraging Constellation Brands’ distribution reach to accelerate market penetration
  • U.S. CBD market is an opportunity for Canadian pot producers to generate additional revenue and cash flows while also building brand awareness and recognition, notes Eight Capital analyst Graeme Kreindler (buy, PT C$100)
  • Entrance to the U.S. hemp market "substantially increases Canopy’s targeted total addressable market," writes Canaccord analyst Matt Bottomley (speculative buy, PT C$50)
    • Says Canopy may be able to secure a "meaningful share" of the U.S. hemp market
  • Canopy has 10 buys, 1 hold, 1 sell, avg. PT C$63: Bloomberg data
  • Shares +60% over past 12 months vs S&P/TSX Composite Health Care Index -5.6%
  • NOTE: Jan. 14, Canopy Growth to Build First U.S. Hemp Plant in New York State

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