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- Barclays has started the coverage on several Canadian Licensed Producers with less than favorable recommendations arguing that they are unlikely to gain a sizable advantage from potential federal legalization of cannabis in the U.S.
- The analysts have issued Underweight ratings on Tilray (NASDAQ:TLRY) and Cronos Group (NASDAQ:CRON) which were trading ~3.3% and ~1.1% lower in the pre-market, respectively. The price target for Tilray (TLRY) at $10 per share indicates a downside of ~19% while that for Cronos (CRON) at $5.5 per share implies a downside of ~1% to the last close.
- Meanwhile, the firm has rated Canopy Growth (NASDAQ:CGC) with an Equal-weight recommendation with the price target of $14 per share implying a premium of ~3% to the last close. Canopy (CGC) was trading flat in the pre-market.
- The analysts point out that a majority of the enterprise value of the above stocks have been attributed to their potential in the U.S. market while the firms cannot directly invest in the U.S market.
- They observe that the companies have entered into deals with the U.S. MSOs seeking minority stakes in the event of a federal legalization of cannabis in the U.S.
- “We think the benefit of these deals accrues to the shareholders of MSOs rather than those of the Canadian companies,” the team of analysts argued.
In a transaction with MedMen Enterprises (OTCQB:MMNFF), Tilray (TLRY) took a major bet on the U.S. cannabis market a few months ago.