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The Canadian cannabis industry recorded volatile price movements last week and we are keeping a close eye on how the sector closes out the year.
Canada has been one of the hottest places for cannabis investors and over the last quarter, the sector has moved considerably higher. During this time, Horizons Marijuana Life Sciences ETF (HMMJ.TO) (HMLSF) has rallied more than 60% and we are keeping an eye on how this index continues to trade.
Canada’s legal cannabis industry continues to attract significant capital and serious players. Last month, Constellation Brands (STZ: Nasdaq) made a $250 million investment in Canopy Growth Corp. (WEED.TO) (TWMJF), a leading Canadian licensed marijuana producer.
We were very favorable on this development as it served as a catalyst for the entire cannabis industry. Over the next year, we expect to see more investments like this and think that we are barely in the first inning of a multi-decade growth cycle.
Aphria Announces a Major Partnership with Shoppers Drug Mart
We expect to see Canadian cannabis stocks trade higher today and this comes after Aphria made a major announcement after the market closed yesterday.
After the market closed, Aphria Inc. (APH.TO) (APHQF) announced that it has secured an agreement to become a medical cannabis supplier to Shoppers Drug Mart.
Under the agreement, Aphria will supply Shoppers Drug Mart with Aphria-branded medical cannabis products. These products are expected to be sold online and we are very favorable on this opportunity for Aphria.
Before Shoppers can start selling Aphria’s medical cannabis products, the company needs to be approved by Health Canada as a licensed producer. We do not expect this process to take too long and will closely monitor the situation.
Expect a Favorable Response from the Market
Shortly after this news was announced, Canaccord Genuity raised its price target and changed its rating on the company. The broker-dealer changed Aphria’s rating from Hold to Speculative Buy and increased its price target to $14 from $8.25.
We are favorable on this development and expect to see the shares move considerably higher on this news. Although Shoppers will not be able to sell the products out of its 1,300+ stores, this agreement lays the foundation for future growth.
Investors need to keep an eye on how the market responds to this announcement as we expect to see the sector record a solid move higher today.