After leading Canadian Licensed Producers (LPs) announced quarterly financial results that came in lower than what many broker-dealers expected, several firms have issued new ratings and/or price targets on several LPs.

Several of the price target decreases are substantial and we find the changes to be worth highlighting. We attribute the change in sentiment to companies reporting that it has lowered its cash burn by closing production facilities and by reducing employee headcount. 

Below we have highlighted price target changes that have been reported by broker-dealers so far this month. We believe the price target and rating trend on Canadian LPs is to the downside and this represents a major change from earlier in the year. We believe that our readers need to be aware of such changes and this is a trend that we will continue to follow: 

1. CIBC lowered its price target on Canopy Growth (WEED.TO) (CGC) to C$38 from C$55
2. CIBC lowered its price target on Aurora Cannabis (ACB.TO) (ACB) to C$9 from C$15 and changed its rating to underperform from neutral
3. CIBC changed its rating on Organigram Holdings (OGI.TO) (OGI) to neutral from underperform
4. Cowen and Company lowered its price target on Cronos Group (CRON.TO) (CRON) to C$9 from C$14
5. Piper Sandler lowered its price target on Tilray, Inc. (TLRY) to C$15 from C$26
6. MKM Partners raised its price target on Cronos Group (CRON.TO) (CRON) to C$12 from C$11
7. Stifel lowered its price target on Cronos Group to C$7.50 from C$12
8. Jefferies changed its rating on Tilray to Buy from Underperform and raised its price target to $23 from $4.77
9. CIBC raised its price target on Tilray to $25 from $23
10. Craig-Hallum lowered its price target on Village Farm (VFF.TO) (VFF) to $16 from $25
11. Cowen and Company resumed coverage on Tilray with a Buy rating and $20 price target 

Aphria’s Earnings Report Highlights the Risks in Canada

When Aphria reported third quarter financial results in April, it reported to have been negatively impacted by provincial lockdowns and by price compression. This headwind is expected to be an ongoing issue for Canadian LPs and we prefer operators that have taken action to be better aligned with consumer demand

After Aphria’s earnings report, Canaccord Genuity downgraded the Canadian LP from Speculative Buy to Hold. The company also received a price target cut from Stifel to C$18 from $22. Going forward, large scale Canadian LPs that did not close facilities are expected to face massive cash burns and we believe our readers need to be aware of this trend.

Although the Canadian and the global cannabis industry has recorded impressive advancements so far this year, the recent trend has been to the downside. Sentiment seems to be more negative that it was earlier this year and momentum has been trending to the downside. We consider the current trend to be transitory and expect to see a bounce back in the back half of the year. 

Going forward, we will monitor how broker-dealers respond to Canadian LP earnings reports from a rating and a price target standpoint. If you are interested in learning more about changes in ratings and a price targets, please send an email to support@technial420.com with the subject “Canadian LP Earnings Reports” to be added to our distribution list. 

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