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Wall Street's first cannabis analyst names her top US marijuana stocks

Zack Guzman · Senior Writer
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Top Cowen analyst Vivien Azer started covering the main cannabis players in 2016, about two years before Canada even legalized adult recreational use.

Needless to say, for cannabis investors trying to make sense of a rapidly maturing space, her insights are those that catch significant attention.

On Friday, Azer initiated coverage on five U.S. cannabis companies that she deemed noteworthy as she reiterated her call for total U.S. cannabis sales to hit $80 billion by 2030.

Relative to their Canadian cannabis peers, Azer notes that the operating paradigm for U.S. multi-state cannabis companies is more nuanced given tax differences and restrictions in scientific research. However, “brand development in the U.S. is much easier, given regulatory nuances, which favors the U.S. operators who emphasize a traditional CPG model that relies more on high-margin finished goods, as opposed to specialty retail,” she wrote in a note published Friday.

With that in mind, coupled with investors voicing a rising importance on profitability and strong cash positions, Azer recommended three companies with Outperform ratings:

  • Green Thumb Industries (GTBIF) with a $18.50 per share price target

  • Curaleaf (CURLF) with a $10.50 per share price target

  • Cresco Labs (CRLBF) with a $14 per share price target

HOLYOKE, MA - JANUARY 31: Jonell Santiago works at Green Thumb Industries cultivation center in Holyoke, MA on Jan. 31, 2019. Green Thumb Industries, a Chicago-based cannabis company, invested $10 million to create a cultivation center in a former Holyoke mill building. Massachusetts is home to dozens of old textile and paper mills that once thrived, making the state a manufacturing powerhouse. By the 1950s, those industry jobs moved south and the mill buildings deteriorated from decades of neglect. Many have been repurposed as apartments or smaller businesses. Some have been torn down. But one unlikely industry is bringing them back: cannabis. Since the legalization of medical and recreational cannabis in 2012 and 2016, cannabis companies have been buying and leasing these relics of industrialization. There are a few reasons why: quicker profits, availability, and the negative stigma that surrounds weed. (Photo by Jonathan Wiggs/The Boston Globe via Getty Images)
Jonell Santiago works at Green Thumb Industries cultivation center in Holyoke, MA. (Photo by Jonathan Wiggs/The Boston Globe via Getty Images)

Both Green Thumb Industries and Curaleaf boast calendar 2019 revenues that topped the $32 million average posted by the 10 largest multi-state operators. While Cresco Labs can’t say the same, the company impressed enough with its outsized early profitability and a “focused approach on key states (favoring depth over breadth), and reliance on higher-margin brands, (as opposed to retail,)” she writes.

Out of all three Outperform rated stocks, Green Thumb Industries won Cowen’s highest conviction for its “consistent focus on shareholder returns” thanks in part to the best positive EBITDA in absolute terms and strongest margins in the most recent quarter amongst Cowen’s coverage.

None of the names, however, were able to escape the pressure that has hit the cannabis sector overall these past few months, with all three losing ground — including a 13% drop for Cresco Labs over the past three months.

Cresco's performance has been the weakest of Cowen's newly minted outperform-rated picks, falling 13% over the last three months.
Cresco's performance has been the weakest of Cowen's newly minted outperform-rated picks, falling 13% over the last three months.

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Zack Guzman is the host of YFi PM as well as a senior writer and on-air reporter covering entrepreneurship, startups, and breaking news at Yahoo Finance. Follow him on Twitter @zGuz.

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