Canopy Growth (CGC - Get Report) is best positioned to capitalize on the cannabis revolution, according to a note from Oppenheimer analyst Rupesh Parikh, who initiated coverage of the stock with a "perform" rating, which is similar to a neutral rating.
The firm didn't issue a price target.
Parikh called Canopy Growth the company best positioned to capitalize on the global cannabis market over time, but he is tepid on the stock due to Wall Street's "lofty" expectations from the sector.
"We expect CGC to capture more than its fair share of the $150B+ global opportunity longer-term. We believe a stockpile of ~$3B in cash, the Constellation Brands (STZ - Get Report) partnership, and R&D investments should help to drive share over time. In Canada to date, recent commentary suggests market share in the 25-30% range suggesting early success," Parikh said.
The firm noted that there is still a large potential for losses to persist due to regulatory delays and a full valuation.
"Shorter-term, we believe a full valuation, lofty Street expectations, the potential for losses to persist, and regulatory delays hamper the case for outperformance," Parikh said. "CGC remains on our radar, and we are closely watching the company's ability to navigate a difficult backdrop lately and improve profitability."
Canopy Growth shares were rising 0.5% to $28.51.