Dec 21, 2020 by MICHAEL BERGER
Last month, the cannabis sector was the big winner of the US general election and several states voted in favor of legalizing both medical and recreational cannabis.
During the last decade, there has been a major sentiment shift as it relates to both medical and recreational cannabis. When highly conservative states like Missouri and South Dakota are voting in favor cannabis legislation, it is easy to understand that the sector is just getting started.
If you combine the amount of revenue that was generated by the five largest US multi-state operators (MSOs) in the most recent quarter, the amount will exceed $1 billion. Clearly, cannabis has become big business and we believe the recent growth trends are just getting started. As new states legalize medical and/or recreational cannabis, we expect revenue numbers to continue to grow and this is a trend that we are bullish on.
You do not need to take our opinion as it relates to an improved outlook for the US cannabis industry. Just look at the trend of price target hikes and rating changes from leading broker-dealers and you will notice that the trend is steadily improving. Going forward, we expect to see this positive trend become even more significant and want to highlight 5 recent rating and price target changes on US cannabis companies.
Innovative Industrial Properties, Inc. (IIPR) is the largest cannabis REIT in the US and it has been executing on an acquisition strategy and own 66 properties that have approx. 5.4 million rentable square feet that is 99.3% leased (based on square footage). Some of the recent rating and price target changes include the following:
December 17th: Compass Point raised its price target to $220 from $180
November 9th: Craig Hallum raised its price target to $170 from $125
September 17th: BTIG raised its price target to $177 from $151
September 8th: Piper Sandler issued a Buy rating and a $150 price target
MedMen Enterprise Ltd. (MMEN.CN) (MMNNF) was once considered to be a leading play on the US cannabis market. We never were able to understand the attraction to MedMen when compared to other US operators. Although MedMen’s stock has lived up to our expectations, it recently reported quarterly financial results that came in higher than expected. There have not been many changes from broker-dealers on MedMen post-earnings, there was one:
December 8th: Cowen and Company raised its price target to $0.20 from $0.13 (CAD)
4Front Ventures Corp. (FFNT.CN) is a US cannabis retailer that has recently started to gain traction. The company recently announced a sale lease-back transaction with Innovative Industrial Properties and is an opportunity that we are following. Like MedMen, 4Front does not have significant broker dealer coverage but the recent changes have been:
December 1st: Haywood Securities raised its price target to $1.75 from $1.25 (CAD)
AYR Strategies Inc. (AYRA.CN) (CNBQF) is US cannabis retailer that has been a strong performer in the back half of 2020. When compared to MedMen or 4Front, AYR has a much higher stock price, and we will monitor how it performs in 2021. Recent price target changes include
December 11th: Canaccord Genuity raised its price target to $45 from $40 (CAD)
Flower One Holdings Inc. (FONE.CN) (FLOOF) is a company that had high aspirations but was not able to execute as it had hoped. The company has limited broker-dealer coverage and is an opportunity that we are cautiously optimistic with. Recent changes from broker dealers include:
September 22nd: Canaccord Genuity resumes coverage with a Speculative Buy rating and a $0.50 price target
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