On Tuesday, BioSteel, Canopy Growth’s (CGC) majority-owned sports beverage brand, disclosed distribution deals with Manhattan Beer and Reyes Beer Division. BioSteel drinks will be distributed in 14 Metro New York counties by the former, while the latter will be responsible for the California and Florida markets.
For Jefferies analyst Owen Bennett, the benefits of the partnerships are threefold. For one, they expand BioSteel’s reach, which will help boost their contribution to overall sales, and provide the company with “the ability to distribute directly to everywhere drinks are sold across the US.”
Secondly, the wider retail distribution could provide an overall boost to Canopy’s US CBD (cannabidiol) business. While the regulatory landscape is still uncertain, once there is more clarity from the FDA, US CBD has the “potential to be a significant market in the years ahead.”
Lastly, Bennett notes, the company’s underwhelming performance in Canada could be counter balanced by the rising US opportunity.
“Getting the US right is increasingly important for Canopy given the pressures it is seeing in Canada,” Bennett noted. “Indeed, we estimate its $ rec share in Q1 dropped to sub 10% levels, down from the highs of 22% a year ago. To our mind, the company’s issues in Canada stem from a poor approach to branding and consumer segmentation/understanding, and it is refreshing to see that it does not appear to be making the same mistakes in the US.”
However, the positive developments are not yet enough to shift Bennett’s forecasts for Canopy. Overall, Bennett keeps a Hold rating on CGC shares, alongside a C$20.2 ($15.38) price target. The figure implies possible downside of 15% from current levels. (To watch Bennett’s track record, click here)
Overall, with 8 analyst reviews on record, split into 2 Buys and 8 Holds, Canopy Growth has a Moderate Buy consensus rating. The fence sitters, however, are mostly in line with Bennett’s view – they give the stock an average price target of US$18.21, implying shares will stay range-bound for the foreseeable future. (See CGC stock analysis on TipRanks)
To find good ideas for cannabis stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
