After publishing an article that covered the potential for Mexico to legalize recreational cannabis, we noticed that is significant interest in the vertical.
According to leading cannabis market research firm New Frontier Data, Mexico’s annual cannabis sales would be between $1.8 billion and $2 billion.
Following the uptick in interest, we wanted to provide more insight on some of the companies that are focused on the Mexican cannabis market. Specifically, we are analyzing the operators from a price target standpoint from broker-dealers.
In late 2018, Aurora Cannabis Inc. (TSX: ACB) (ACB) (Frankfurt: 21P; WKN: A1C4WM) reported to have acquired Farmacias Magistrales S.A. The reason why the reported acquisition was significant is because Farmacias was Mexico’s first federally licensed importer of raw materials that contain tetrahydrocannabinol (THC).
During the last month, several broker-dealers have changed their respective price targets on Aurora Cannabis. Besides for CIBC, the stock is trading well above the average price target that has been issued by the following broker-dealers:
- CIBC raised its price target to $18.50 from $17 (CAD)
- Jefferies raised its price target to $9.44 from 4.59 (CAD)
- Canaccord Genuity raised its price target to $14 from $11 (CAD)
In the previous article, we highlighted Canopy Growth Corporation (WEED.TO) (CGC) as a potential beneficiary of the changing legislation in Mexico. We believe the company will be a beneficiary due to the relationship that it has with Constellation Brands (STZ).
In late February, two broker dealers changed their rating to sell on Canopy Growth and believe the downgrade is related to price the stock is trading at. Last month, Jeffries and Eight Capital changed its rating and issued a $29.09 and a $34.50 price target, respectively.
Canopy Growth is trading well above these levels and we are closely following the Canadian cannabis company. We believe the company could be a major beneficiary of a legislation change in Mexico and are favorable on the other international markets that it has been focused on.
Khiron Life Sciences
Earlier this year, Khiron Life Sciences Corp. (TSXV: KHRN) (KHRNF) (Frankfurt: A2JMZC) reported to have introduced Latin America’s first internationally accredited post graduate medical cannabis program in partnership with Mexico’s TecSalud School of Medicine and Health Sciences. The program provides essential medical cannabis education to practicing doctors and comes as Khiron plans to roll out its satellite clinic and market awareness strategy in Mexico.
Although Khiron has reported several significant developments so far this year, it does not have the coverage that Canopy Growth or Aurora Cannabis have. In December 2020, ATB Capital lower its price target on Khiron to $1.20 (CAD) after it reported lackluster quarterly financial results.
Prior to ATB, the last price target change on Khiron was in May 2020. At the time, Canaccord Genuity lower its price target to $2.80 from $3 (CAD) and has yet to change the target or de-list the company.
When compared to Canopy Growth or Aurora Cannabis, Khiron is trading well below the average price target that has been issued on it. With a market cap that is below $90 million (CAD), we believe the Mexico opportunity provides Khiron with more upside potential when compared to Canopy Growth or Aurora Cannabis.
If you want to learn more about the companies which are trying to capitalize on the Mexican recreational cannabis market, please send an email to firstname.lastname@example.org with the subject “Mexican Cannabis Companies” to be added to our distribution list.