Cannabis stocks ended the week on a high note, with key industry players witnessing significant growth. This surge is attributed mainly to bullish price targets set by Wall Street bankers. Leading cannabis company Canopy Growth (NASDAQ:CGC) saw its shares climb by 10.8%, while Aurora Cannabis (NASDAQ:ACB) and Cresco Labs (OTC:CRLBF) both marked a 7.5% increase, and Curaleaf recorded a 4.6% gain.
TD Cowen, an investment banking firm, significantly upped its price target on Canopy Growth's stock, forecasting that the shares could reach 1.80 Canadian dollars (approximately $1.33 U.S.) within a year. Bank of America (NYSE:BAC) also raised its price target for the marijuana giant, albeit conservatively by 18%, to CA$0.66 ($0.49).
The banking sector's optimism follows Canopy Growth's announcement of filing bankruptcy papers for its BioSteel dietary supplements business, which accounted for 60% of the company's losses last quarter. The shutdown of BioSteel is expected to significantly cut down Canopy Growth's cash burn and erase material reporting weaknesses, potentially paving the way for the share price to ascend.
Despite the positive outlook, Bank of America maintains a cautious stance on Canopy Growth, rating the stock as underperforming and suggesting that it is currently overvalued.
In recent weeks, the cannabis industry has been bolstered by encouraging news. U.S. government regulators are taking steps to ease marijuana regulations, and Congress is pushing legislation allowing banks to offer services to cannabis businesses. Additionally, President Joe Biden has voiced support for legalizing medical marijuana.
In line with this favorable environment, Aurora Cannabis announced a debt paydown that could help the company achieve positive free cash flow next year. Similarly, Canopy Growth is making strides to reduce costs and possibly report positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) by the end of the year.
However, despite these positive developments, a degree of caution is advised. Over the past month, Aurora Cannabis stock has risen 76%, Curaleaf Holdings (OTC:CURLF) has increased by 111%, Cresco Labs has grown by 133%, and Canopy Growth has seen the most significant surge of 268%. Given these hefty gains, it's worth questioning whether the positive news has already been factored into the current cannabis stock prices. In the case of Canopy Growth, Bank of America believes this to be true.
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