Canopy Growth Corp (NYSE: CGC) recently announced a deal to acquire U.S. cannabis company Acreage Holdings Inc (OTC: ACRGF) that is contingent on U.S. federal legalization of marijuana. On Friday, one analyst said Acreage will be a key part of Canopy’s long-term U.S. strategy.
The Analyst
Bank of America analyst Christopher Carey reiterated his Buy rating and $80 price target for Canopy.
The Thesis
Carey recently met with management from Acreage to discuss the deal with Canopy and what it means for the company’s U.S. strategy. Shareholders from both companies will vote to approve the deal in a special meeting scheduled for June 19. If the deal is approved, Canopy will pay $300 million in cash to Acreage for the exclusive right to acquire the company if and when the U.S. ultimately legalizes cannabis nationwide.
Need more cannabis news? Check out all of our coverage here.
Acreage management said they anticipate the Canopy deal will easily be approved by shareholders. They also suggested the company could soon step up its acquisition strategy once the deal is approved by shareholders and regulators.
Carey said the Acreage deal is just one example of the type of bold strategy that Canopy is utilizing to solidify its position as an early market leader in a fledgling cannabis business.
“While a large cultivator, CGC is laying groundwork to excel in other areas higher on the value chain, driven by a ‘one step ahead’ mentality,†Carey wrote in a note.
In addition to locking down a major U.S. retail presence in Acreage, Canopy is also pursuing federally legal compounds, such as CBD, and had additional opportunities in the U.S. market from FDA-approved drugs and other tangential cannabis-related products.
Price Action
Canopy stock traded higher by 1 percent to $41.80 per share on Friday.
Related Links:
Canopy Growth's Bruce Linton 'Is Always One Step Ahead,' Says Harvest Health CEO
Analyst Likes Cronos, But Valuation Suggests 'Downside Potential'
Latest Ratings for CGC
| Date | Firm | Action | From | To |
|---|---|---|---|---|
| Jun 2019 | Initiates Coverage On | Buy | ||
| May 2019 | Initiates Coverage On | Buy | ||
| Apr 2019 | Upgrades | Hold | Buy |
View More Analyst Ratings for CGC
View the Latest Analyst
Ratings
See more from Benzinga
© 2019 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.