Canopy Growth Corporation (CGC) shares rose nearly 10% on Wednesday morning after Piper Jaffray initiated coverage with an Overweight rating and a price target of $40.00 per share. Earlier this week, Cowen & Co. analyst Vivien Azer also predicted that Canopy Growth shares would outperform, with sales ramping up from C$239 million to C$778 million by 2020.
The company intends to enter the U.S. market following the passage of the 2018 Farm Bill, which effectively legalized hemp-based products – including cannabidiol (CBD). After adding hemp assets to its portfolio in 2016, Canopy Growth announced the successful harvest of approximately over 190 million square feet. The company believes that the CBD-rich hemp could yield approximately 7,000 kilograms of hemp-based CBD per year.
Piper Jaffray and Cowen & Co. were also bullish on Tilray, Inc. (TLRY), which has become a leader in the global cannabis industry. Piper Jaffray initiated the stock with an Overweight rating and a price target of $90.00 per share, while Cowen & Co. believes that Tilray could receive a boost from its expanded relationship with Novartis AG (NVS) to develop non-smokable and non-combustible cannabis products.
From a technical standpoint, Canopy Growth stock rebounded from trendline support in late December, broke out from trendline resistance at year end, and rose to key resistance levels near the 50- and 200-day moving averages. The relative strength index (RSI) remains neutral with a reading of 56.17, but the moving average convergence divergence (MACD) could see a bullish crossover in the near term.
Traders should watch for a breakout from key resistance levels near the 50- and 200-day moving averages at $33.00 toward reaction highs near $35.00. A breakout from these levels could lead to a move toward R2 resistance at $39.02 or prior highs of $47.50. If the stock fails to break out, there could be some consolidation near the pivot point at $29.10 before a further attempt higher.
The author holds no position in the stock(s) mentioned except through passively managed index funds.