Jefferies downgraded Canopy Growth Corp. (NYS:CGC) (TSE:CA:WEED) on Friday and slashed its stock price targets for cannabis companies by an average of 50%, a day after a revenue warning from Hexo Corp. (NYS:HEXO) (TSE:CA:HEXO) prompted a sharp selloff in the sector as investors moved to price in heightened risk. "With a number of negative headlines impacting the sector the last 6 months, and still with little sign of profitability, the sector has seen greater risk/volatility priced in," analysts Owen Bennett and Ryan Tomkins wrote in a note to clients. The analysts downgraded Canopy, the market leader, to hold from buy and cut their price target to C$25 ($18.8) from C$77. The analysts cut Hexo's stock price target to C$3.80 from C$7.70, cut Cronos (NAS:CRON) (TSE:CA:CRON) to C$10 from C$15, lowered Aurora Cannabis (NYS:ACB) (TSE:CA:ACB) price target to C$7 from C$14, cut Organigram (NAS:OGI) to C8.20 from C10.50, cut Green Organic Dutchman (OTC:TGODF) (TSE:CA:TGOD) to C$2.40 from C$6.50 and lowered Tilray's price target to $25 from $57. At the same time, they upgraded Hexo to hold from underperform and upgraded Organigram and Flowr Corp. (TSX:CA:FLWR) to buy from hold. "The next 12 months price performance should see strong divergence between those who can execute/move to profit and the rest," the analysts wrote. Canopy shares fell 1.8% premarket. The stock has fallen 24% in 2019, while the ETFMG Alternative Harvest ETF has fallen 25% and the S&P 500 (S&P:SPX) has gained 17%.
Oct. 11, 2019, 8:38 a.m. EDT