Echelon Wealth Partners hiked its price target for Neptune Wellness Solutions (TSX, NASDAQ:NEPT) to $8 from $5.25 after the company struck a strategic medical cannabis oil agreement with Canopy Growth (TSX:WEED).
Shares of Neptune were quoted at $4.51, up $1.28, in afternoon trading on the TSX on June 19.
Analyst Doug Loe writes that new relationship “establishes Neptune as a major player in cannabis oil production, even before considering expertise in value-added purification/formulation.”
Mr. Loe said he assumes that Neptune’s core revenue model will be to provide Canopy either with cannabis oil itself or purified cannabinoids or co-formulated cannabinoid-containing nutritional supplements, and “we thus will continue to assume as before that Neptune will recognize revenue on transfer of material to Canopy.”
He said the alliance with a major industry participant like Canopy firmly establishes Neptune as a highly relevant contract manufacturer in the emerging medical cannabis universe and “we are revising our model accordingly.”
