Azer and other experts still picked Canopy Development as the market leader in Canada, though they stated Canadian business are lagging behind their US marijuana counterparts.
Wall Street just leveled a stark caution versus purchasing Canadian marijuana stocks and said financiers need to move their attention to emerging United States names, rather.
In a Monday morning note, Cowen expert Vivien Azer– among the very first analysts at an US financial investment bank to cover the sector– reduced a basket of significant Canadian marijuana business (LPs), including the embattled Aurora Cannabis, Tilray, and Sundial.
That leaves Canopy Growth, under the guidance of its new CEO, David Klein, as Azer’s leading Canadian marijuana choice, and the only Canadian company she preserves her outperform rating on. Azer noted Cronos Group as market carry out, though she stated the Altria-backed company has actually fallen down to 2nd on her pecking order.
” While industry challenges around doors and high quality flower supply are well understood, we now believe that the slower than expected rollout of marijuana 2.0 items will likewise show as a headwind to revenues,” Azer composed in the note.
Aurora Cannabis slipped 6.6%in trading on Monday and Tilray lost 10%, while Sundial climbed 5.2%.
The Canadian marijuana sector has been struck with a list of bad press in recent months, consisting of slumping share costs, executive shake-ups, repriced offers, business governance scandals, and wave after wave of layoffs amidst an industry-wide capital crunch.
Azer modified her projection for the Canadian marijuana market down by 32%, to $3.5 billion, given the slow rollout of cannabis shops and an absence of inventory.
Going long on United States marijuana names
” More broadly, we choose U.S. marijuana names to its Canadian peers, and restate GTI [Green Thumb Industries] as our favored name in U.S. marijuana,” Azer wrote.
Azer isn’t the only expert to sour on Canadian cannabis.
In a note from earlier in February, Purpose Investments analysts Greg Taylor and Nawan Butt write that “we are seeing a fight for survival in Canada.”
“[A] nd we can stem this back to the truth that too much capital was applied too rapidly without paying attention to the most essential factor in retail-oriented operations: the customer,” the analysts composed.
Like Azer, Purpose Investments’ experts state they anticipate Canadian LPs to “strike the reset button” over the next few quarters with brand-new executive teams and revamped plans to control a crowded market.
” Momentum might just be exponential south of the border,” they composed. “Although it feels a bit aggressive to say that we haven’t even witnessed the inflection point yet, United States multi-state operators (MSOs) have an incredible quantity of room to grow.”
To that end, the analysts state that they are long on US marijuana companies with big footprints that have actually been able gain access to financing– like Cresco Labs and Acreage Holdings– and that it’s finest to “keep away” from Canadian cannabis business for the next 2-3 quarters.
