Even though that’s obvious, few investors and analysts do it regularly and it’s why a new analyst report is catching a lot of attention today.
Even though we don’t watch analysts too closely (you will see precisely why below), in this case there’s one critical bit that is worth giving some close attention.
Because if you look at the details, you can get in position for the next marijuana stock rally.
Here’s the breakdown.
Scott Hundley of Seaport Global Securities upgraded Canopy Growth (CGC) to a “Buy” today.
Although the Seed Investor is no fan of Canadian marijuana cultivators like Canopy at this stage in the growth cycle, there is some important news here.
The timing of it all is critical too.
After all, this change came just two weeks after Canopy released a lackluster earnings report. Canopy disappointed on revenues, net earnings, and growth.
Canopy shares tumbled 14% immediately after the report.
The analysts took action and seven out of the 20 analysts covering Canopy Growth shares to reduce their price targets on the stock (which is worse – groupthink or downgrades always coming after something bad and a stock is down big?).
Canopy shares have slid steadily since then. They’re now down 30% since before the earnings report.
On top of all that, Canopy’s troubles sparked another downswing in the summer slump for marijuana stocks.
It is so bad the Canadian Marijuana Index is now down 50% from March highs and at its lowest level since 2017.
Despite the downturn, however, one analyst is upgrading Canopy.
Does he see something most others aren’t?
In this case, that appears to be the case because he is looking forward at what’s ahead, not backward for what Canopy did in the April through June period covered by its earnings report.
In his analyst report, Hundley noted:
“Although regulatory development has been both disappointing and frustrating, there is no question that cannabis offers an attractive growth profile. In addition, the Canadian space is about to gain a fair amount of pricing power, in our view, as the 2.0 market opens up late this year.”
The last part about “2.0” is the key part of this report.
CNBC reports in Canopy stock will get a boost from Canada’s ‘2.0 market’ in cannabis, analyst says that:
The 2.0 market refers to Canada’s plan to let pot producers add popular vapes, edibles and infused beverages to be sold legally later this year. Currently, only dried cannabis flower, oil and sublingual’s sprays are legal for sale in Canada.
That right there could have been lifted from the pages of the Seed Investor.
The most important event in Canadian marijuana industry history outside of complete legalization will be lifting the ban on consumer products infused with marijuana extracts.
This extract-based product market accounts for half of all marijuana product sales in the most mature legal markets like Colorado.
Canada will be no different in time.
Basically, the “2.0 market” will be doubling of the legal marijuana industry in Canada.
Best of all, it’s happening later this year when the regulations go into effect.
The time to get prepared for it is now even though most of the sector is still reeling from Canopy’s earnings report.
Again: if you want to make money in stocks, look forward, not backward.