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Canadian marijuana producers were under pressure yesterday and this selloff is starting to pick up some steam.
This weakness has caused these stocks to no longer trade at overbought levels and we think a pullback of this nature is healthy for a long-term rally. We remain bullish on the Canadian marijuana sector and will monitor how this trend continues.
From bought deals to international opportunities, earnings to acquisitions, the Canadian marijuana sector has reported several significant developments over the last month.
Aphria Reports Strong Earnings and the Shares Plunge
Earlier this week Aphria (APH.TO) (APHQF) reported strong second quarter financial results and we are bullish on the initiatives the company is undertaking. The market responded to these results and two broker dealers raises their price target on Aphria after this release.
PI Financial raised its price target to $25 from $14 while Canaccord Genuity raised its price target to $23 and issued a speculative buy rating. Aphria is laser focused on increasing production capacity and expanding its distribution via strategic relationships.
After the market closed, Nuuvera (NUU.V) announced that it is in negotiations with Aphria regarding an offtake agreement for 60,000 kilograms of cannabis, which is expected to be available for sale in January 2019. This would provide Aphria with a significant revenue stream and are favorable on the company’s long-term outlook.
Canopy Growth Drops 10% on Strong Volume
Canopy Growth (WEED.TO) (TWMJF) fell more than 10% on strong volume and we are monitoring how the shares trade from here. Earlier this week, Cowen and Company raised its price target to $44 from $24 and the share surged higher on this news.
WEED.TO traded as high as $44 following this upgrade and the shares were bound to pullback after this rally. Although remain bullish on Canopy following this pullback, we think the shares are fairly valued at current levels.
Canopy Growth is by far the largest and most diverse licensed Canadian medical marijuana producer. The company is levered to some of the world’s largest legal marijuana markets and has increased its reach by making investments and acquisitions all over the globe. We are monitoring this pullback and investors need to keep an eye on this stock.
ISS Recommends Voting for CanniMed’s Newstrike Acquisition
One of the most highly followed stories over the last month has been the potential acquisition of CanniMed Therapeutics (CMED.TO) (CMMDF) by Aurora Cannabis (ACB.TO) (ACBFF). CanniMed does not want this acquisition to be completed and we are monitoring how this situation continues to develop.
Yesterday, CanniMed announced that Institutional Shareholder Services, a leading independent proxy voting advisory firm, has recommended that CanniMed shareholders vote in favor of the Newstrike Resources acquisition.
We continue to remain favorable on Aurora’s acquisition of CanniMed and are very bullish on the combined company. Aurora would significant enhance CanniMed’s current business and we see significant opportunities for synergies.
Aurora has been very successful with the investments and acquisitions it has made and we think CanniMed would complement Aurora’s existing business. CanniMed is very focused on the medical marijuana opportunity and Aurora would significantly increase the CanniMed’s reach. Aurora has significant cannabis assets all over the world and this would benefit CanniMed.