BofA says that while the development of the Canadian cannabis market has been slower than many industry watchers had anticipated, Canopy Growth is still well positioned in what will eventually be a high growth market.
"Overall we are favorable to Canopy's long-term prospects, as a leading balance sheet [has] allowed Canopy to scale both in Canada and abroad (specifically the US), at a faster clip than peers," said analyst Bryan Spillane.
Canopy Growth shares rose 4.3% to $19.04 Friday afternoon.
Spillane gives Canopy credit for "right-sizing" its operations for the current operating environment as the company's new management team has been "striking a balance between growth, productivity and financial returns."
Canopy Growth's price target of C$30 represents a 9x 2021 expected enterprise value to sales ratio compared to Bank of America's average 6.3 multiple for the rest of the Canadian cannabis sector.
"While we think there remains risks near-term, namely execution on the roll-out of derivative product forms in Canada, we see this appropriately reflected in Street estimates and valuation on shares," Spillane said.
The firm is bullish on Canopy's balance sheet, which features C$2.27 billion in cash, and its new CEO David Klein who Spillane said has switched the company from a "be-first" mentality to a more fiscally minded approach.
In March, the company announced it was permanently shuttering a licensed 3 million square foot production capacity in British Columbia, a move that BofA lauds.