Bank of America Merrill Lynch equity analyst Christopher Carey recently initiated coverage on the volatile cannabis sector, highlighting three marijuana stocks in particular as ‘Buys‘. In addition to his pot stock picks, Carey also pointed out one to stay away from.
With some cannabis-related companies up over 50% year-to-date, “some companies are living up to the hype, others have risen too far, too fast—and investors could get burned,” according to Barron’s.
Merrill’s 3 Marijuana Stock Picks
Aurora Cannabis Inc. (NYSE:ACB) (TSX:ACB) – $11 per share price target
Aurora Cannabis Inc., has funded capacity in excess of 500,000 kg per annum and sales and operations in 24 countries across five continents, making it one of the world’s largest and leading cannabis companies. In addition to the company’s rapid organic growth and strong execution on strategic M&A, Aurora has invested in and established strategic partnerships with a range of leading innovators, including Choom Holdings Inc. and more.
Canopy Growth Corp. (NYSE:CGC) (TSX:WEED) – $52 per share price target
Canopy Growth Corp. is a world-leading diversified cannabis and hemp company, offering distinct brands and curated cannabis varieties in dried, oil and Softgel capsule forms. From product and process innovation to market execution, Canopy Growth is driven by a passion for leadership and a commitment to building a world-class cannabis company one product, site and country at a time. The company has operations in 12 countries across five continents.
HEXO Corp. (NYSE:HEXO) (TSX:HEXO) – $10 per share price target
HEXO Corp. is an award-winning consumer packaged goods cannabis company that creates and distributes prize-winning products to serve the global cannabis market. Through its hub and spoke business strategy, HEXO Corp is partnering with Fortune 500 companies, bringing its brand value, cannabinoid isolation technology, licensed infrastructure, and regulatory expertise to established companies, leveraging their distribution networks and capacity.
Merrill’s Marijuana Stock to Avoid
Cronos Group Inc. (NASDAQ:CRON) (TSX:CRON) – $13 per share price target
Cronos Group Inc. is a globally-diversified cannabinoid company with international production and distribution across five continents. Despite this diversification, recent earnings fell short of analyst expectations, triggering downgrades from GMP Securities, Canaccord, and PI Financial.
In the near-term, “distribution channel constraints in Canada could prompt companies, namely larger ones with capital, to seek strategic actions in international jurisdictions, including potential for deals in the U.S. and Europe,” according to Carey. In the meantime, be sure to subscribe to updates here so you never miss an important update.
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