Consumer Products

Merrill Lynch Is Very High on 5 Top Buy-Rated Marijuana Stocks

Canopy Growth

This is among the largest marijuana companies from a market capitalization basis. Canopy Growth Corp. (NYSE: CGC), with its subsidiaries, engages in growing, possession and sale of medical cannabis in Canada. Its products include dried flowers, oils and concentrates, softgel capsules and hemps. The company offers its products under the Tweed, Black Label, Spectrum Cannabis, DNA Genetics, Leafs by Snoop, Bedrocan Canada, CraftGrow and Foria brand names

The company also offers its products through Tweed Main Street, a single online platform that enables registered patients to purchase medicinal cannabis from various producers across various brands. The company was formerly known as Tweed Marijuana and changed its name to Canopy Growth in September 2015.

The Merrill analysts have put a $53 price target on the shares, which trading most recently at $40.16.

Cronus

A major international company took a large position in Cronus Group Inc. (NASDAQ: CRON) late in 2018. This is a global cannabis company founded in 2012 and based in Ontario, Canada, with a presence across five continents. Its principal activities are the production and sale of cannabis and cannabis-derived products in federally legal jurisdictions.

Back in December, Altria agreed to buy a 45% stake in the company for about $1.8 billion, a sign of the new world in which the tobacco company must compete. This strategic partnership provides Cronos with additional financial resources, product development and commercialization capabilities, as well as deep regulatory expertise, to better position the company to compete, scale and lead the rapidly growing global cannabis industry. The stake also gives Altria the option to increase to full ownership if it so chooses down the road.

The $19 Merrill price target compares with the most recent close at $15.29 a share.

Hexo

This is another popular stock in the fast-expanding marijuana arena. Hexo Corp (NYSE: HEXO) is a diversified company, selling a portfolio of cannabis and related products. The company is based in Quebec, where it is a preferred supplier to the province’s provincial cannabis purchaser. The company also has national distribution, with plans to expand internationally.

Through its hub and spoke business strategy, Hexo partners 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. As one of the largest licensed cannabis companies in Canada, Hexo operates with 1.8 million square feet of facilities in Ontario and Quebec, and a foothold in Greece to establish a eurozone processing, production and distribution center. The company serves the Canadian adult-use and medical markets.

The analysts at Merrill have an $8 price target. The stock closed at $5.20 on Friday.

Other brokerage firms have started coverage on the marijuana industry, but Merrill is one of the biggest players on Wall Street to begin full-scale coverage. While legalization for recreational and medical use has sped up in recent years, to some investors there remains the taboo, given that marijuana is a drug that is still illegal in the United States on a federal basis.

With that in mind, the fact of the matter is we should see an increasing number of states legalizing its recreational use, as the consumer demand is there, as is the potential for huge tax windfalls. Illinois was the most recent of the 11 states to legalize recreational use and sales, starting on January 1 of 2020. There will be more to follow, as the issue is being discussed in numerous states.

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