Piper lowers price targets for cannabis firms as Stifel upgrades Cronos to Buy
In this week's "Rising High," The Fly's recurring series focused on cannabis stock news, The Fly looks back at analyst views on the industry, an oil license award and the acquisition of several properties.
PIPER CUTS CANNABIS TARGETS: Piper Jaffray analyst Michael Lavery revisited the four Canadian licensed producers under his coverage on Tuesday, namely Aurora Cannabis (ACB), Canopy Growth (CGC), Cronos Group (CRON) and Tilray (TLRY). The analyst said he continues to believe Canopy and Cronos look best positioned, as both companies have strong cash positions to facilitate growth and have good visibility on key strategic priorities. The analyst cut his estimates for Tilray but kept an Overweight rating on the shares as he still sees growth potential in both Europe and the U.S. Lavery said he believes Aurora lacks visibility on key strategic growth priorities and he kept a Neutral rating on the shares. The analyst lowered his price target for Aurora to $4 from $7, for Canopy to $36 from $40, for Cronos to $12 from $18, and for Tilray to $31 from $72.
STIFEL UPGRADES CRONOS: Last Friday, Stifel analyst Andrew Carter upgraded Cronos Group to Buy from Hold with a price target of C$14.00, down from C$16.50. The analyst said Cronos is "unconstrained" in its ability to invest towards a $200B global opportunity with C$2B in cash on hand and resources of Altria Group (MO), Carter told investors in a research note. The analyst said he believes Cronos will show an "enhanced revenue growth profile" that leverages the distribution capabilities of Altria to build its U.S. CBD business and demonstrate "break-through product potential" in the Canadian vapor segment. Given the company's "advantaged and enhanced position," investors should buy Cronos shares following their recent pullback, said Carter.
NEEDHAM INITIATES ZYNERBA WITH BUY: Needham analyst Serge Belanger initiated coverage of Zynerba (ZYNE) on Monday with a Buy rating and $18 price target. The analyst cited the potential of the company's late-stage topical CBD gel product candidate Zygel building a "presence" in the growing CBD therapeutic segment while targeting difficult-to-treat neuropsychiatric conditions and rare epilepsy disorders. Belanger noted that Zygel has so far yielded a positive phase 2 result in patients with Fragile X Syndrome as it improved the patients' "key neuro-behavioral symptoms." The analyst further contended that the current valuation of Zynebra does not fully account for the potential of Zygel becoming a part of the developing therapeutic CBD landscape and believes that the stock offers a "compelling" risk/reward ahead of several key data readouts expected in the first half of 2020.
RADICLE AWARDED OIL LICENSE: Canopy Rivers (CNPOF) announced Thursday that its portfolio company, Radicle Medical Marijuana, has received approval for oil sales from Health Canada. This additional license allows for the development and sale of new cannabis products, including cannabis oil and concentrates. Canopy Rivers has invested $10M in Radicle. Canopy Rivers currently owns 24% of Radicle on a fully diluted basis and also receives a long-term royalty cash flow stream from Radicle with a minimum annual payment of $900,000 over a 20-year term.
IIPR ACQUIRES ILLINOIS, FLORIDA PROPERTIES: Innovative Industrial Properties (IIPR) announced Tuesday that it closed on the acquisitions of two properties in Joliet and Kankakee, Illinois, which comprise approximately 90,000 square feet of industrial space. The purchase prices for the properties were $32.8M in total and concurrent with the closing, IIP entered into a long-term, triple-net lease agreement for each property with a wholly owned subsidiary of Cresco Labs (CRLBF). Assuming full reimbursement for the tenant improvements, IIP's total investment in the two properties will be approximately $46.6M. The company also announced Wednesday that it closed on the acquisition of a property in Quincy, Florida, which comprises five buildings totaling approximately 120,000 square feet of industrial space, from Trulieve Cannabis (TCNNF).
OTHER CANNABIS STOCKS: Other publicly-traded companies in the space include Aleafia Health (ALEAF), Aphria (APHA), Biome Grow (BIOIF), CannTrust (CTST), CV Sciences (CVSI), Delta 9 (VRNDF), DionyMed Brands (DYMEF), Elixinol Global (ELLXF), Greenlane (GNLN), General Cannabis (CANN), GrowGeneration (GRWG), Harborside (HSDEF), Harvest Health & Recreation (HRVSF), Hemp Inc. (HEMP), HEXO (HEXO), ICC International Cannabis (KNHBF), India Globalization Capital (IGC), Indiva (NDVAF), Khiron Life Sciences (KHRNF), Liberty Health Sciences (LHSIF), MediPharm Labs (MEDIF), MedMen Enterprises (MMNFF), Origin House (ORHOF), Organigram (OGI), Planet 13 Holdings (PLNHF), Real Brands (RLBD), Sproutly (SRUTF), Sunniva (SNNVF), Tetra Bio Pharma (TBPMF), Vireo Health (VREOF), Wayland Group (MRRCF) and Westleaf (WSLFF).