In this week's "Rising High," The Fly's recurring series focused on cannabis stock news, The Fly looks back at House committee approval of the MORE ACT, Canopy Growth's (CGC) response to lawsuits and analyst views following earnings.
MORE ACT APPROVED BY HOUSE COMMITTEE: The Marijuana Opportunity Reinvestment and Expungement, or MORE, Act was approved by the House Judiciary Committee Wednesday morning in Washington D.C. The act would remove marijuana from the list of controlled substances in the U.S., expunge certain cannabis offenses, and reinvest in communities impacted by the War on Drugs. "The MORE Act is one of the most comprehensive marijuana reform bills ever introduced in the U.S. Congress. The MORE Act aims to correct the historical injustices of failed drug policies that have disproportionately impacted communities of color and low-income communities by decriminalizing marijuana at the federal level, reassessing marijuana convictions, and investing in local communities," according to an announcement about the proposed legislation. U.S. Senator Kamala Harris introduced the companion bill in the Senate. "As more states legalize marijuana, millions of Americans with marijuana-related convictions continue to face overwhelming barriers to jobs, education, and housing," said Senator Harris. "This is a matter of racial and economic justice.”
CANOPY SAYS SECURITIES SUITS ‘WITHOUT MERIT’: In a Thursday statement, Canopy Growth said that it is "aware of yet-to-be certified securities class-action suits having been filed in the United States that allege that the company issued certain false and misleading statements. The company believes it has conducted itself in accordance with all relevant securities laws, and that the claims are without merit. The company intends to vigorously defend itself against any such suits."
ATLRIA INCREASES CRONOS STAKE: A Tuesday post to the website "Canadian Insider" indicates that Altria Summit (MO) acquired 4,176,986 shares of Cronos Group (CRON) in a transaction dated November 14.
ANALYSTS SOUND OFF ON AURORA: On Friday, Piper Jaffray analyst Michael Lavery lowered his price target for Aurora Cannabis (ACB) to $3 from $4 after the company's revenue and EBITDA were below his fiscal Q1 estimates. The slow rollout of Ontario retail stores may continue hindering Aurora's growth in the near-term, and the launch of derivative products in December "remains uncharted territory," Lavery said. He added that Aurora has industry leading production capacity, but oversupply looks likely in 2020 and could add pressure to pricing in Canada. Also on Friday, Cantor Fitzgerald analyst Pablo Zuanic upgraded Aurora to Overweight from Neutral with a price target of C$5.85, up from C$5.10. The analyst said he does not expect a worse quarter for the group than the September quarter and even though little may change in the December quarter, positive catalysts align in 2020. Further, based on his read of the quarter for the group, he estimated Aurora is "overall in better shape than peers." The analyst highlighted the company's "stable" pricing, "best-in-class" gross margins of 56% and no signs of provisions for rebates and returns. Additionally on Friday, MKM Partners analyst Bill Kirk lowered his price target on Sell-rated Aurora to C$3.00 from C$3.50. The analyst stated that the company's "cautious" plans to curtail capital spending by ceasing construction on Aurora Nordic 2 and the final construction of Aurora Sun suggests that investors should also be reluctant to deploy capital in the industry.
CANOPY GROWTH PRICE TARGETS LOWERED: On Friday, MKM Partners analyst Bill Kirk also his price target on Neutral-rated Canopy Growth to C$23 from C$30. Canopy Growth saw an "astounding" EBITDA loss of CAD156M amid adjustment to revenue related to returns and pricing which, the analyst said cannot be considered "one time." Kirk added that the quarter echoes his concerns about the company's high inventory levels, noting that if Ontario doesn't open the stores that Canopy anticipates, those levels could again be too high. Benchmark analyst Mike Hickey also lowered his price target on the company Friday to C$30 from C$60 following the company's "disappointing" Q2 performance. He stated that he suspects investors are now favoring disciplined growth and a path to profitability given that the global and domestic cannabis market are not achieving the presumed near-term growth opportunity. He said he anticipates near-term performance trends will improve and kept a Buy rating on Canopy shares, citing future catalysts such as the opening of the U.S. CBD market and "Cannabis 2.0." Additionally on Friday, Compass Point analyst Rommel Dionisio lowered his price target on shares to $17 from $24 after the company’s results. The analyst said the results included a sharp revenue shortfall that can be largely attributed to retailers lowering their inventory levels, a slower than expected pace of retail store openings, and continued overall pricing pressure in the Canadian market due to oversupply. While the advent of the sale of advanced forms of cannabis such as vapes and edibles in Canada in December should help, Dionisio said he remains concerned on overall Canadian pricing trends given the continued growth in production capacity and recent introduction of value-priced brands in flower/pre-rolls. Meanwhile on Wednesday, BofA/Merrill analyst Christopher Carey upgraded Canopy to Buy from Neutral with a price target of C$24. The analyst noted that the stock has fallen 38% since his downgrade two months ago which pointed to the slowdown in orders and relatively high consensus estimates. Following that decline, Carey stated that the bad news has been priced into a "more reasonable" valuation as estimates have come in to become achievable or "even beatable" and inventories have turned leaner.
OTHER CANNABIS STOCKS: Other publicly-traded companies in the space include Aleafia Health (ALEAF), Aphria (APHA), Biome Grow (BIOIF), CannTrust (CTST), Canopy Rivers (CNPOF), Cresco Labs (CRLBF), 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), Innovative Industrial Properties (IIPR), 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), Tilray (TLRY),Tetra Bio Pharma (TBPMF), Trulieve Cannabis (TCNNF), Vireo Health (VREOF), Wayland Group (MRRCF), Westleaf (WSLFF) and Zynerba (ZYNE).
Canopy Growth
+1.88 (+10.66%)
Altria Group
+0.14 (+0.29%)
Cronos Group
+0.31 (+4.52%)
Aurora Cannabis
+0.23 (+8.71%)
APHA
+
CV Sciences
+ (+0.00%)
Tilray
+1.2 (+5.74%)
Trees Corporation
+ (+0.00%)
IGC Pharma
-0.0268 (-3.27%)
CannTrust
+0.0988 (+11.09%)
Trulieve Cannabis
+ (+0.00%)
ZYNE
+