Cannabis companies have been catching the eye of Wall Street investment banks for a while now, with some institutions making history by initiating first-time coverage over the cannabis industry as a whole.
However, while the industry as a whole is expected to explode, there are some companies that are more favored by some analysts then others. Constellation Brands (NYSE: STZ) could jump by as much as 33 percent in the near future said one Credit Suisse analysts today.
Kaumil Gajrwala, an analyst at Credit Suisse, began coverage on the cannabis sector and issued an “Outperform” rating on Constellation Brands today according to Barrons. She went on to say that she expects the company’s stock to reach $230 per share, adding that the seller of Corona beer boasts the strongest free cash flow growth of any alcohol company out there in the market.
“We have confidence in the company’s beer growth strategy. Canopy brings a [first mover] advantages with infrastructure and scale that is difficult to replicate,” said Gajrawala. “[W]e do not know of any other cannabis company with operations in Canada with the same production capabilities and distribution infrastructure as Canopy Growth…Canopy brings a [first mover] advantage with infrastructure and scale that is difficult to replicate.”
Overall, the analyst expects Constellation Brands to continue taking riskier, more high-profile ventures, such as the private-equity-style $4 billion investment in Canopy Growth Corp (TSE: WEED)(NYSE: CGC). The investment saw Constellation Brands acquire a 38 percent stake in the cannabis giant, and certainly a portion of this optimistic appraisal of the company comes down to the strength of Canopy Growth.
Additionally, Gajrawala added that Canopy already has a cannabis CBD-infused beverage ready for production. “We do not know of any other cannabis company with operations in Canada with the same production capabilities and distribution infrastructure as Canopy Growth.” Currently, CBD-infused beverages and edibles in Canada remain illegal until mid-October of this year, while the regulatory situation in the U.S. has changed recently due to the departure of the head of the FDE.
We are seeing more financial institutions begin coverage of the cannabis sector. Earlier this month, investment bank Cowen & Co released a report on the marijuana industry as well as initiated coverage over a variety of cannabis companies. 2019 will likely be the year where cannabis companies cement their respectability in the eyes of investors and Wall Street alike.
Overall, shares of Constellation Brands is sitting at $167.64, up around one percent since yesterday. For a company of such size, major stock moves to these kinds of developments are difficult to see, although still a possibility within the relatively young cannabis market.
Constellation Brands Inc Company Profile
Constellation Brands, Inc., incorporated on December 4, 1972, is an international beverage alcohol company. The Company is a producer and marketer of beer, wine and spirits with operations in the United States, Canada, Mexico, New Zealand and Italy. The Company’s segments include Beer, Wine and Spirits, and Corporate Operations and Other. The Company’s wine portfolio is complemented by select spirits brands and other select beverage alcohol products. It is a multi-category supplier (beer, wine and spirits) of beverage alcohol in the United States. – Reuters
