Following a site visit to the company’s British Columbia facilities, Canaccord Genuity analyst Neil Maruoka has raised his target price on Canopy Growth Corp. (TSX:WEED), though the analyst is not yet recommending investors buy the stock.

Maruoka toured Canopy’s B.C. Tweed facilities in Aldergrove and came away affected by what he saw.

“We came away from the site visit very impressed by the scale of cultivation and the speed at which the company has been able to ramp production so soon after receiving cultivation licenses for both greenhouses,” the analyst says. “We believe these facilities firmly position Canopy as the largest cannabis producer globally with more than 2.4 million sq. ft. of production, and on track to exceed 5.6 million sq. ft. of domestic growing capacity. In less than two months, Canopy has been able to plant approximately 30 acres (~1.2 million sq. ft.) of cannabis, which should allow the company to build inventory ahead of the legalization of recreational cannabis in Canada. We believe availability of supply is a critical factor in securing provincial supply commitments, and Canopy has participated in all tender processes announced so far.

In a research update to clients today, Maruoka maintained his “Hold” rating on WEED, but raised his one-year price target on the stock from $26.50 to $27.50, implying a return of negative 6.8 per cent at the time of publication. The analyst explained that the disparity between his bullish take on the company’s business and tepid opinion of its stock comes down to valuation.

“With industry-leading global scale through these facilities, we believe that Canopy has incrementally de-risked its domestic and international strategies,” Maruoka says. “We have therefore modestly lowered the discount rate in our Canadian medical DCF (from 9% to 8%) and our international NPV (from 18% to 17%). As a result of these changes, we are increasing our target price for Canopy to C$27.50 (from C$26.50). However, despite the share price pullback off January highs, we remain cautious on Canopy based on valuation.”

Maruoka thinks Canopy will generate EBITDA of $58.8-million on revenue of $84.0-million in fiscal 2018. In 2019, he expects the company will produce EBITDA of $173.6-million on a topline of $424.0-million.