Cantor Fitzgerald has upgraded Aurora Cannabis Inc (NASDAQ:ACB) to Overweight from Neutral with a price target of C$4.05, up from C$3.90. The analyst views Aurora as an attractively valued pure cannabis play.
He expects Europe, specifically Germany, to be a “relevant potential catalyst and sentiment driver” for cannabis stocks over the next 12-18 months.
Only Aurora and Tilray Inc (NASDAQ:TLRY) have licenses to produce in Germany. Cantor believes Tilray and Aurora should be well-positioned on questions regarding imports in the future German recreational market and the limited number of new domestic production licenses issued.
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The analyst is “more comfortable” recommending Aurora over Tilray as a play on Germany and views the selloff as a buying opportunity.
German Market: Cantor estimates the German medical market at about 30 tons, equivalent to €480 million (an average price of €16/gram) that could increase to €1.53 billion in 2028 (€3 billion taking retail prices) with improved quality and increased domestic production.
Flower accounts for 2/3 of sales and extracts for the balance (all reimbursed). There are about 60 suppliers, including importers and wholesalers.
The analyst expects ACB leads the flower segment with a ~15% share. TLRY is #1 in extracts but losing its market share on more potent offerings from competitors.
Price Action: ACB shares are up 4.23% at $1.48 during the premarket session on the last check Friday.
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