Leading Analyst Calls Bottom on Canadian Cannabis Stocks + New Ratings and Price Targets

Cantor Fitzgerald Analyst Pablo Zuanic Sees “Green Days Ahead” for Canadian Pot Stocks

New 264-Page Research Note Features Ratings and Price Targets on 6 of Canada’s Top Cannabis Stocks

Cantor Fitzgerald analyst Pablo Zuanic is predicting “green days ahead” for shares of beat up Canadian cannabis stocks. The analyst just released a new 264-page research note in which the first line of the report reads “we call the bottom on Canadian cannabis stocks.”

Since Canada federally legalized adult-use cannabis on October 17, 2018, Canadian pot stocks have struggled to reach new highs and over the past eight months, the market has been under serious pressure. First, the sector was hit with weaker than expected earnings from companies such as Canopy Growth (TSX: WEED) (NYSE: CGC) and Aurora Cannabis (TSX: ACB) (NYSE: ACB). The CannTrust (TSX: TRST) (NYSE: CTST) Health Canada scandal followed rocking the market and casting even more doubt into investor’s minds. The CannTrust saga dominated the headlines all summer and the story culminated with Health Canada suspending the company’s cultivation and sales licenses.

Another major event took place on July 3, 2019, when Canopy Growth shocked the market by announcing it had fired its founder and Co-CEO Bruce Linton. Linton was seen by many as the face of the Canadian cannabis industry and his departure created even more uncertainty. Markets hate uncertainty and all of these negative catalysts provided the perfect storm for pot stocks to get hammered down to near 2017 lows.

Many experts believed the market would rebound in September and things seemed to be going according to plan with short sellers beginning to cover their large short positions but at the same time the U.S. vape crisis was gaining steam and media outlets around the world jumped all over the story. The vape crisis stopped marijuana stocks in its tracks and forced the sector to roll over again.

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The Horizons Marijuana Life Sciences Index ETF (TSX: HMMJ) was the first cannabis ETF and its holdings include many of Canada’s top cannabis stocks. As expected, the Horizons Marijuana ETF has performed poorly in 2019 as its shares have declined in value by roughly 50%. All six of the companies Zuanic initiated coverage on are amongst the top ten holdings in the HMMJ ETF.

“We call the bottom on Canadian cannabis stocks and think positive catalysts far outweigh negative ones,” wrote Zuanic in his research note.

The analyst is bullish on the Canadian market and anticipates the sector will shift as a result of a slew of positive catalysts such as improved adult-use sales, cannabis 2.0 legalization of edibles, extracts, beverages and vapes, more insurance coverage, lower medical cannabis taxes and the possibility of additional consumer packaged goods (CPG) companies investing in the Canadian market.

“Valuations are at two-year lows, and we deem them attractive based on the long-term opportunity. The stocks that will outperform will show evidence of a strengthening Canadian franchise [market share, pricing, and margins] and outsized growth versus peers in terms of exports,” added Zuanic.

Zuanic forecasts Canada’s adult-use market growing to $2.44 billion in sales by 2020 and $4.5 billion by 2022. The analyst believes the Canadian medical marijuana market will also expand to sales of $850 million by 2022 and expects international medical sales to reach $2.7 billion in 2022.

Next week is an important week for Canadian marijuana stocks as Canopy Growth, Cronos Group and Tilray all report earnings. The market will be watching closely for any signs that the industry is moving closer to profitability. A surprise earnings beat would go a long way towards strengthening the battered cannabis sector.

Cantor Fitzgerald Analyst Pablo Zuanic Initiated Coverage on the Following Canadian Cannabis Stocks:

Organigram (TSX: OGI) (NASDAQ: OGI)