Cannabis is quickly moving out of the shadows and transforming into a multibillion-dollar global industry. In the United States alone, Arcview Market Research and BDS Analytics estimate that total cannabis sales — including hemp-derived CBD oils — will come in at an eye-catching $44.8 billion in 2024.
This enormous commercial opportunity, in turn, has grabbed the attention of some of Wall Street’s top analysts this year. A number of firms, for instance, have issued ratings, along with 12-month price targets, for a host of publicly traded cannabis companies in 2019. That’s a remarkable turn of events, given that the industry was widely viewed as off-limits by most analysts less than two years ago due to the industry’s problematic legal status in key territories, widespread banking restrictions, and long history of attracting unscrupulous actors.
Which cannabis stocks are at the top of Wall Street’s initial report card? Analysts seem to favor…
Aleafia Health (NASDAQOTH:ALEAF) and Medmen Enterprises (NASDAQOTH:MMNFF)as their top two cannabis picks, which, oddly enough, have also been some of the industry’s worst performers so far this year. Is it time to catch these falling knives? Let’s dig deeper to find out.
Aleafia Health: Upside potential of 389%
Among top-tier cultivators, Wall Street thinks that Aleafia Health has the highest upside potential by a wide margin with an average price target of $4.75. The reason? Last March, Aleafia made a game-changing transaction by snapping up the medical cannabis company Emblem in an all-stock transaction.
This acquisition greatly enhanced Aleafia’s medical service provider network in Canada, access to high-margin derivative products, as well as its annual production capacity. In fact, this Emblem acquisition catapulted Aleafia into Canada’s top 10 growers, with an estimated peak annual production output of 138,000 kilograms. Perhaps the best part, though, is that Aleafia’s industry-leading cannabis clinic network has the potential to drive strong brand loyalty among its customer base.
What’s the downside? The company is well behind the leaders in the space in terms of overall business development. While this Emblem transaction accelerated the company’s evolution in a noteworthy manner, it still may struggle to compete against the industry’s more established and better funded names — especially those with Fortune 500 partners.
Bottom line: Despite the company’s undeniable progress this year and Wall Street’s rosy outlook, Aleafia’s stock remains a high-risk, high-reward play. Thus, this small-cap pot stock is arguably…
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