PI Financial Both CannaRoyalty Corp. (CRZ-CN) and iAnthus Capital Holdings Inc. (IAN-CN) should benefit from the current growth of the U.S. cannabis market as well as the possibility of a re-classification of cannabis south of the border, said PI Financial analyst Jason Zandberg.
In a research report on the U.S. cannabis industry released Tuesday, Mr. Zandberg initiated coverage of both companies with "buy" ratings.
"We expect U.S. cannabis stock valuations to significantly increase once the U.S. Federal government changes its stance on the restrictive scheduling of cannabis," he said. "We look to the Canadian market to see what can happen when a government adopts a more liberal stance on cannabis."
"Looking into the U.S. market, we expect to see similar stock appreciations when the Federal Government takes a more relaxed stance on cannabis. Currently, U.S. cannabis companies are valued at a significant discount to the Canadian companies. With U.S. federal cannabis laws historically being so prohibitive, that gap in valuations was justified. However, the regulatory landscape is changing, with multiple states now having full scale recreational cannabis programs and the federal government loosening enforcement. With cannabis legislation on the U.S. federal level fast approaching, we expect to see the valuation gap begin to close."
Mr. Zandberg said CannaRoyalty's past as an investment company providing growth capital to cannabis business on both sides of the border provided its management "deep insight" into the market and also a strong base of assets to operate in California.
He set a target price of $8 for its shares, which exceeds the current consensus of $7.38.