Cana­dian mar­i­juana stocks soar­ing

National Post (Latest Edition) - - INVESTING - Ge­off Zochodne gzo­chodne@ post­media. com

With less than a year to go un­til the tar­get date for the le­gal­iza­tion of recre­ational pot, share prices of Cana­dian mar­i­juana com­pa­nies have been on a tear. But a note Wed­nes­day from Canac­cord Ge­nu­ity sug­gests some may have come too far too fast.

While Canac­cord upped its odds that Canada will ac­tu­ally le­gal­ize recre­ational mar­i­juana by next year, to 90 per cent from 80 per cent, it also down­graded in­dus­try leader Canopy Growth Corp. to sell from hold, due to the stock’s sky­rock­et­ing val­u­a­tion.

Shares of Canada’s largest li­censed mar­i­juana pro­ducer have in­creased more than 30 per cent over the past month. They closed at $13.07 Thurs­day, down 3.83 per cent for the day.

“We be­lieve the new pro­vin­cial frame­works have been ben­e­fi­cial for Canopy, pro­vid­ing clar­ity into the roll out of a mar­ket where the com­pany is best po­si­tioned,” an­a­lysts Neil Maruoka and Matt Bot­tom­ley said Wed­nes­day in a re­search note. "How­ever, we ex­pect that there also re­main sig­nif­i­cant bar­ri­ers, as the prov­inces will likely seek to cap­ture some or all the re­tail mar­gin.”

The Cana­dian Mar­i­juana In­dex, which in­cludes 18 of the coun­try’s big­gest cannabis stocks, has shot up about 26 per cent since the On­tario govern­ment an­nounced last month it in­tends to sell recre­ational pot on­line and in 40 brick- and- mor­tar stores by the fed­eral govern­ment’s tar­get le­gal­iza­tion date of July 2018.

“Mar­kets have clearly taken this news as pos­i­tive,” Canac­cord said of On­tario’s plan.

Canac­cord said they see Canopy emerg­ing “as one of the dom­i­nant play­ers” in the Cana­dian cannabis in­dus­try and raised their tar­get price to $11 from $9.50, de­spite the down­grade.

“With rec leg­is­la­tion likely on track to be passed be­fore year-end, we now have greater cer­tainty that the fed­eral govern­ment can meet its tar­get for a July 1, 2018 rollout of the rec mar­ket in Canada,” they said.

A re­cent note from Macki e Re­search Cap­i­tal said Cana­dian mar­i­juana pro­duc­ers in also have op­por­tu­ni­ties abroad thanks to the coun­try’s ap­proach to cannabis.

“Over­all, we f ore­cast strong mar­ket growth do­mes­ti­cally and in­ter­na­tion­ally, which should bode well for many of the com­pa­nies op­er­at­ing in the in­dus­try,” wrote an­a­lyst Greg McLeish.

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