Canopy Growth (NYSE:CGC) (TSX:WEED) made it abundantly clear that it takes the opportunity in the U.S. hemp market seriously. After securing a license to produce and process hemp in New York state, the Canadian cannabis maker announced last week that Martha Stewart has joined the company in an advisory role to develop products within the hemp-CBD space. The immediate focus will be on CBD products relating to pets.
By definition hemp is cannabis that contains low levels of the psychoactive ingredient THC. The legalization of hemp in the U.S. in December 2018 has cleared the way for Canopy Growth to jump into the U.S. hemp market, which is projected to grow to US$22 billion by 2022.
Also read: Why Canopy Growth (CGC) Stock Has What It Takes
Jefferies analyst Owen Bennett commented, "Martha Stewart could prove valuable for targeting pets (jury out on other segments) We are wary that some cannabis partnerships are more about the headlines vs actually making strategic/value creation sense. With Martha Stewart, there are obvious factors that would suggest a shrewd move. First is her reach. The Martha Stewart brand reaches approximately 100mn consumers across all media and merchandising platforms. Second is the fact she is often viewed as a source of useful "how-to" information for all aspects of everyday living. Many consumers moving into CBD will be new to the space and therefore looking for a trusted source around "how to use" and "what's it for". Despite this, we also think there needs to be a natural synergy between CBD, the brands, and the demographics. To this, while she has numerous brands, there are not many for us that really stand out as a perfect fit. The exception is pets, the initial focus of this deal, and therefore we do believe it could prove a valuable relationship. Stewart is well known for her love of animals, championing campaigns for the health and wellness of pets, and she also sells a number of pet related items on Amazon."
However, Bennett reiterated a Hold rating on WEED/CGC stock with a price target of C$64 (USD$48.10), suggesting there's a limited upside ahead. (To watch Bennett's track record, click here).
Most of Wall Street echoes a neutral point of view. Based on 8 analysts polled by TipRanks in the last 3 months, 3 rate Canopy Growth stock a Buy, while 5 analysts recommend Hold. The 12-month average price target among these analysts stands at C$67.80, marking a nearly 10% upside from where the stock is currently trading. (Get TipRanks’ free analysis report on CGC)
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