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Canaccord Rates Canopy a 'Hold' with Lower than Average Price Target

October 2, 2017

 

A few days ago, Canaccord Genuity's Neil Maruoka assigned a 'hold' rating to shares of Canopy Growth Corp. (TSX:WEED) (OTC:TWMJF), alongside a price target of $9.50 per share. With an analyst average price target of $11.25 CAD per share, Canaccord's price target is the lowest out of the four analysts we track that cover Canopy. We've reached out to Maruoka regarding whether his price target was measured in USD or CAD to be certain.

 

Based on the Canaccord stock ratings system, a 'hold' means that "the stock is expected to generate risk-adjusted returns of 0-10% during the next 12 months." 

 

Maruoka used a discounted cash flow, a.k.a. DCF, valuation model which uses "future free cash flow projections and discounts them to arrive at a present value estimate." Assumptions of a 10% weighted average cost of capital, a.k.a. WACC, and a terminal growth rate of 2% were built into Canaccord's DCF model, valuing shares of the Canadian cannabis giant at $9.50 per share. 

 

According to the release, the risks Canaccord sees facing Canopy include:

  • the shift to wholesaler distribution model will likely generate pricing headwinds

  • regulatory headwinds such as a delay to recreational legalization could enhance competitive pressures

  • legalization could create regulatory enforcement issues

  • recreational legalization is an opportunity, but could also create challenges for medical marijuana

 

These are some risks to keep in mind, but it should be noted that Maruoka is ranked 9,131 out of 10,849 exerts tracked on TipRanks.com based on a -1.4% average return per rating and a 37% rating success rate.

 

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