Weed has made it to Wall Street in a big way. Three marijuana stocks currently trade on the New York Stock Exchange (NYSE), with another recently applying to be listed. Two marijuana stocks are listed on the Nasdaq.
Wall Street is quite bullish on several of the top marijuana stocks, with expectations of huge increases over the next 12 months. But there's one big marijuana stock that appears to have analysts more excited than any other. Which stock is it? I was surprised to learn that the answer is Tilray (TLRY).
What analysts like about Tilray
The consensus analysts' one-year price target for Tilray represents an upside of nearly 70% over the current share price. One especially optimistic analyst thinks Tilray could soar more than 150% over the next year. Even the most pessimistic analyst surveyed by The Wall Street Journal projects that Tilray's share price should still increase by around 8% above the current level.
One thing analysts probably like about Tilray is the company's management team. CEO Brendan Kennedy served as managing director and then chief operating officer of Silicon Valley Bank Analytics before founding cannabis-focused private investment firm Privateer Holdings in 2011. Privateer Holdings formed Tilray in 2013.
Kennedy is surrounded by a strong executive team, including individuals with solid credentials spanning multiple industries. Tilray recently hired several new vice presidents who have impressive backgrounds with companies that market well-known consumer brands.
Analysts also probably have a favorable view of Tilray's recent deals. The company announced a partnership with giant beer-maker Anheuser-Busch InBev in December to research non-alcoholic cannabis-infused beverages. In January, Tilray signed a revenue-sharing agreement with Authentic Brands Group (ABG) to market consumer cannabis products under ABG's brands, including Nine West and Prince. The company quickly followed with another deal to buy Ontario-based marijuana grower Natura Naturals.
While a couple of its peers have received significant investments from major companies outside the cannabis industry, Tilray hasn't done so yet. Analysts probably view Tilray as a prime candidate for a similar deal in the future.
Check out the latest Tilray earnings call transcript.
Tilray stands at the front of the pack as far as analysts are concerned. But three other top Canadian marijuana stocks aren't far behind.
Analysts think Aurora Cannabis (ACB 0.62%) could rise by 56% over the next 12 months. Like Tilray, Aurora Cannabis hasn't received an equity investment from a big company outside the cannabis industry. Aurora has been aggressive on the acquisitions front over the past two years and claims the largest production capacity in the industry as a result.
Canopy Growth (CGC -0.30%) is king of the mountain among marijuana stocks in terms of market cap. Analysts think the marijuana producer will get even bigger, with a one-year price target reflecting a 53% premium above Canopy's current share price.
Wall Street also appears to think Aphria's (APHA) comeback will continue. The marijuana stock was beaten down after short-sellers alleged the company drastically overpaid for an acquisition of LATAM Holdings in a deal that profited key insiders. Aphria has rebounded significantly from its drop after those allegations became public, though. Analysts expect the stock to jump another 50% over the next 12 months.
The only marijuana stock listed on a U.S. exchange that analysts aren't optimistic about is Cronos Group (CRON 0.45%). In fact, the consensus price target for Cronos reflects a double-digit percentage drop from its current share price.
Are the analysts right?
I don't agree with analysts' negativity about Cronos Group. And so far this year, the naysayers have been proven wrong. Cronos was one of the three hottest marijuana stocks of January and has essentially doubled year to date.
I'm also skeptical that Tilray will be the best performer of the big Canadian marijuana stocks. The company dodged a bullet to some extent a few weeks ago, when Privateer Holdings announced that it wouldn't sell any of its stock during the first half of 2019. However, the firm didn't commit to not taking profits after then. With Privateer owning 76% of Tilray's outstanding shares, any significant selling later this year could weigh on Tilray's share price.
But Wall Street is on the right track, in my view, with its overall bullishness about marijuana stocks. I suspect that the growing Canadian recreational-marijuana market, expanding international medical marijuana markets, and the opening of the legal hemp market in the U.S. will be nice catalysts in 2019 and beyond.