Piper Jaffray Starts Cannabis Watch, Boosts Canopy Growth
US investment bank Piper Jaffray (NYSE:PJC) has joined the slowly growing list of American brokerages covering cannabis producers, giving major industry players like Canopy Growth (TSX:WEED) a significant boost.
With the support of Piper Jaffray, Canopy jumped 13 percent on Wednesday (January 10), closing the day at C$44.50. Piper Jaffray analyst Michael Lavery gave both Canopy and Tilray (NASDAQ:TLRY) overweight ratings in a note obtained by CNBC, putting his faith in the sector’s future growth.
“We do believe the long-term growth opportunities are significant — both from transitioning illicit trade to legal sales, medical sales, and from transitioning sales in health & wellness categories to CBD-infused products,” Lavery wrote in the note.
“While timing of further changes is difficult to predict, the pace of further legalization appears to be accelerating,” he added.
Despite Lavery’s ranking, Tilray took a stumble on Wednesday and had dropped 3.56 percent by the end of the trading day.
As the cannabis sector continues to pick up speed, having Piper Jaffray watch the space lends further legitimacy to an industry working to shake off its historical stigma.
Until now, most cannabis investors looking for brokerage reports have relied heavily on Vivien Azer of investment bank Cowen (NASDAQ:COWN) and one of the first from a major firm to cover the space.
Azer released her 2019 cannabis outlook last week, projecting that US sales will reach $80 billion by 2030.
According to Lavery, there is currently a total addressable market of $15 to $50 billion between Canada’s recreational and medical market, CBD-infused products in US categories and medical consumption in the European Union. Meanwhile, the long-term global cannabis market is likely worth $250 to $500 billion.
“We expect legal recreational marijuana to source from illicit trade and could attract new users to the category, while THC-infused drinks could source share from alcoholic beverages,” Lavery said.
“Medical cannabis can replace a variety of products (e.g. pain relief, sleep aid, opioid replacement). CBD-infused products (with non-psychoactive properties) could gain share from food, beverage, and personal care categories.”
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Securities Disclosure: I, Olivia Da Silva, hold no direct investment interest in any company mentioned in this article.
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