Although the market responded very favorably to Canopy Growth Corporation’s (WEED.TO) (CGC) higher-than-expected third quarter revenues, Canaccord Genuity (CF.TO) (CCORF) cut its rating to Sell from Hold. The Canadian broker-dealer raised its price target on Canopy Growth to $32 from $25 (CAD).
Following the third quarter financial report, Canopy Growth surged higher and recorded a double-digit percentage gain on very heavy trading volume. After the rally, the shares ended the day above $62 (CAD). Based on Canaccord’s price target, there is considerable downside risk to current levels and we are monitoring the trend from here.
On average, Canadian broker-dealers have a more bullish outlook on Canopy Growth and we have highlighted the post-earnings price target hikes below:
- Cowen and Company raised its price target to $75 from $38 (CAD)
- CIBC raised its price target to $64 from $32 (CAD)
- Alliance Global Partners raised its price target to $60 from $41 (CAD)
- MKM Partners raised its price target to $55 from $28 (CAD)
- Benchmark changed its rating to Hold from Buy.
- Stifel Nicolaus raised its price target to $21 from $18 (CAD)
Piper Sandler’s Pre-Earnings Downgrade Does Not Look Smart
In an attempt to look smart, Piper Sandler decided to lower its rating to Neutral (Hold) from Overweight (Buy) ahead of the third quarter financial report (on February 4th) and the firm’s research analysts definitely miscalculated something in their analysis.
The downgrade was reported a few weeks after Alliance Global Partners raised its price target on Canopy Growth to $41 (CAD) from $22 (CAD). Going forward, we are closely following how broker-dealers react to future quarterly earnings reports and believe our readers need to be aware of the sentiment of the market.
Going forward, Canopy Growth’s management team expects the business to be profitable by 2022 and we are favorable on the guidance that was provided on the post-earnings conference call. In future quarters, the market will be highly focused on how Canopy Growth can increase the size of its market share of Canada’s recreational market as well as strategic international medical markets.
Focused on Increasing Market Share in Canada and Abroad
During the third quarter, Canopy Growth reported to own more than 15% of Canada’s recreational market. This is a sizable amount of market share and is higher than the amount that was reported in the prior quarter. In future quarters, we expect to see more brands enter the Canadian recreational market and will monitor how Canopy Growth’s market share changes as a result.
We believe that Canopy Growth is in the early innings of a multi-decade growth cycle and are favorable on its focus on the global cannabis market. With $1.59 billion of cash and short-term investments on the balance sheet, the company is well position to capitalize on unique market verticals and we consider this to be an important aspect of the story.
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