Tilray, SNDL, and Canopy Growth: What Does Wall Street Think of Pot Stocks?

  • The Wall Street consensus for Tilray is that the stock is a hold.
  • Analysts were pleased with SNDL’s expectation-beating second-quarter results.
  • Wall Street has mixed feelings about Canopy Growth’s upcoming Canopy USA consolidation.

Figure 1: Tilray, SNDL, and Canopy Growth: What Does Wall Street Think of Pot Stocks?

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Tilray

Among the analysts who have been covering Tilray‘s  (TLRY) – Get Tilray Brands Inc. Report stock for the past three months, the consensus is that the Canadian cannabis company is currently a hold. Two of the eight analysts believe the stock is outperforming, while two others believe it is underperforming. The remaining analysts are on the fence.

The company reported its first-quarter fiscal 2023 results in early October. It missed both on earnings per share and revenue estimates, causing the stock to plummet about 25%. So far this year, Tilray’s stock has fallen over 50%.

On the bearish side, Benchmark analyst Mike Hickey — who already had a sell recommendation on Tilray — lowered his price target on the company even further, to $2 per share.

Hickey said that, although he is optimistic about the possibility of legalization in the U.S., he doubts that this will happen in the near term.

On the bullIsh side, Cowen analyst Vivien Azer maintained her buy recommendation on Tilray, with a price target of $9 per share. According to Azer, Tilray has been showing signs of stability and believes that its losing streak will end.

Further, the Cowen analyst believes that Tilray’s recent earnings results were fairly in line. And she noted that the company’s gross margins were better than expected.

The fact that Tilray’s management reiterated its outlook for fiscal 2023 — between $70 million and $80 million in adjusted earnings before interest, taxed, depreciation, and amortization (EBITDA) — reinforced Azer’s bullish thesis.

SNDL

The newly rebranded SNDL  (SNDL) – Get Sundial Growers Inc. Report — formerly Sundial Growers — receives far less coverage on Wall Street. In the last three months, there have been only two analysts providing ratings on the Canadian cannabis company.

Canaccord Genuity analyst Shaan Mir is one of them. After SNDL reported its second-quarter earnings in mid-August, Mir changed his neutral recommendation to a speculative buy, forecasting a price target of $5 per share. That would indicate an upside of more than 100% from SNDL’s current price.

In its earnings announcement, SNDL reported strong, expectation-beating revenue results, driven mainly by liquor and cannabis retail sales.

The other analyst covering SNDL is Cantor Fitzgerald’s Pablo Zuanic, who has a neutral recommendation on the stock. Zuanic has set a $3.50 price target on SNDL, which would suggest an upside of nearly 50%.

During the second-quarter earnings call with SNDL CEO Zach George, the analyst expressed concern about the company’s 50/50 joint-venture deal with SAF Group through SunStream Bancorp, a company that aims to invest in cannabis-related verticals.

According to Zuanic, SNDL has a balance sheet of nearly $500 million yet apparently needs the help of other companies. There are other cannabis companies that have been able to operate on their own with seemingly better results.

Canopy Growth

Canopy Growth  (CGC) – Get Canopy Growth Corporation Report shares are down about 66% so far this year. And the consensus on Wall Street is not the most optimistic. Among the eight analysts who have covered Canopy over the past three months, four have sell recommendations, while only one has a buy recommendation.

Canopy Growth has been prominent among cannabis companies recently following its announcement to speed up entry into the U.S. marijuana market with a new holding company, Canopy USA. This newly formed company will also house Acreage Holdings, Wana Brands, and Jetty.

This move sent shares of the company up nearly 27% in a single session, with repercussions for cannabis stocks in general.

The announcement of the new holding company also prompted Canaccord analyst Matt Bottomley to upgrade Canopy Growth from hold to sell, aiming for a price target of $3.12. Pablo Zuanic of Cantor Fitzgerald also upgraded his neutral recommendation on Canopy with a price target of $3.05.

However, Stifel analyst W. Andrew Carter, who is bearish on Canopy, reiterated his sell recommendation, forecasting a $2.13 price target following the Canopy USA announcement.

Carter has a negative view of this transaction due to the long timelines, complexity, capital costs, and other near-term costs that are expected to arise. He believes this should not alleviate the company’s main problems, which are cash burn and balance sheet risks.

As a consequence, the Stiefel analyst believes the formation of Canopy USA will create “asset price inflation across the sector” and work against cannabis stocks as a whole.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Wall Street Memes)

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