Cannabis Stocks are mostly climbed Thursday afternoon as investors are in a fresh high following the go signal from shareholders to cement the Canopy-Acreage $3.4 billion megadeal – an event that would trigger further deals in the sector, analysts said.
While Canopy Growths’ shares fluctuates throughout the day as analysts weighed in the pros and the cons of the deal, which gives the Canadian company, and most significant cannabis player by market value, a foothold in what is expected to become the largest cannabis market in the world, Canopy CGC, +2.20% WEED, +1.44% shares closed with a more slightly higher than 1% climb.
The deal would allow Acreage to sell some of Canopy’s best-known brands, including Tweed and Tokyo Smoke. The positive vote for the acquisition was said to have been motivating the optimistic trading for cannabis stocks, Wednesday, with the newly listed cannabis-software company Akerna’s stock rockets 60% on its second day of trading on Nasdaq.
U.S. sales of medical and adult-use cannabis are expected to grow to $20 billion by 2024, up from $1.9 billion in 2018, according to the State of the Legal Cannabis Markets, Seventh Edition, published Thursday by BDS Analytics and ArcView Market Research.
“This arrangement supplements and amplifies Canopy’s ability to attack the U.S., the largest global cannabis market ($100 billion opportunities by our estimate) providing a significant competitive advantage for Canopy in relation to its Canadian peers,” Stifel analysts led by Andrew Carter wrote in a Thursday note to clients.
“We believe a change in federal law in the U.S. is at best a 2021 possibility and until that time the environment favors U.S. Multi-State Operators (MSO) like Acreage Holdings ACRGF, -1.33% that are building their position in the highly fragmented U.S. market without facing competition from well capitalized and deeply entrenched global consumer companies,” said the Stifel note. Stifel rates Canopy stock a buy and has a C$64 price target, that is 12% above its current trading level.
Canopy is expected to report its fiscal fourth-quarter earnings after the bell.