Cantor Fitzgerald upgraded Aurora Cannabis (TSX:ACB) to “overweight” from “neutral” and raised its price target to $4.05 (Canadian) from $3.90. The stock closed at $1.84 on June 23.
“We expect Europe, and more specifically, Germany, to be a relevant potential catalyst and sentiment driver for cannabis stocks over the next 12-to-18 months,” writes analyst Pablo Zuanic.
In fact, he said it could be the “main sector catalyst, by a long shot, if the U.S. does not make progress on the reform front. And no, we do not expect challenging dynamics in the Canadian recreational market to change much in the year ahead.”
Mr. Zuanic said only two publicly traded companies – Aurora and Tilray – have licenses to produce in Germany, in addition to a private Germany company, Demecan.
“With questions as to whether imports will be allowed in the future German recreational market, and likely a limited number of new domestic production licenses issued to supply that future recreational market, we believe both Tilray and Aurora should be well positioned,” Mr. Zuanic said.
“We are more comfortable recommending Aurora over Tilray as a play on Germany, relatively speaking,” he said. “True, it could be said the recent $173-million (U.S.) equity/warrants raise in late May by Aurora was poorly timed, but we now see the stock drop (at the time it fell 40%, despite only 20% dilution, or less if we account for convertible debt bought at a discount) as a buying opportunity.”
