At one time, mainstream investment houses scoffed at cannabis companies. These were sketchy companies led by even shadier characters. There was no reason to get involved other than to tell their customers to stay away. In a few short years, that has all changed.
The New York Stock Exchange and the Nasdaq both list several Canadian cannabis companies, giving credibility and liquidity to these stocks. In addition to that, there are no cannabis mutual funds and only a small group of ETFs for investors to buy. This has led to more buying of individual stocks and a return of the retail trader. As a result, investment houses are taking a fresh look at the sector — and the latest development is an initiation of coverage by Seaport Global Securities.
The company officially reviewed and rated several companies in the cannabis industry. Seaport analyst Brett Hundley and Luke Perda said that they expect to see the industry rise from $12 billion in value today to almost $630 billion in due time. They believe the market will separate into a retail model that focuses on adult use and a wellness group that specializes in consumer product and pharmaceutical products in more traditional channels. The analysts issued buy ratings on nine stocks, but noted four top picks out of the group with HEXO Corp. (HEXO) being the number one pick. The other top picks are Aphria (APHA) , Acreage Holdings (ACRGF) and The Green Organic Dutchman (TGODF) .
Seaport initiated coverage of HEXO with a Buy rating and a C$12 price target. The company is now at around C$7.53. Hundley said it likes HEXO for its “long-term strategy as a value-added cannabis ingredient company, the purposeful pursuit of a hub-and-spoke model, an early RD effort to generate attractive IP and a favorable relative valuation.” The price