For marijuana stocks, 2019 has been a breath of fresh air. After performing poorly toward the end of 2018, many cannabis companies have seen their share prices bounce back with a vengeance, and even the stocks with the largest market capitalizations have put up impressive numbers to start the year.
Given how much money some investors have made in the marijuana industry, it was only a matter of time before mainstream stock analysts started giving their opinions about the first-mover companies that have staked their claim to the budding market. Jefferies is a well-known analyst company, and it weighed in on several major companies in cannabis. Although it didn't like every stock in the business, Jefferies was optimistic about a majority of the ones it covered -- and it sees some of the best prospects for investors in Green Organic Dutchman Holdings (TGODF +0.00%), with calls for share prices to rise nearly 50% from current levels.
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What Jefferies sees for Green Organic Dutchman
The calls that Jefferies made in late February give Green Organic Dutchman the biggest potential gains, based on its target prices for their shares. The analyst company believes that Green Organic Dutchman's stock price could climb to about $4.65 per share, or 48% higher than the $3.14 per share that it fetched on March 4.
Jefferies was especially impressed with the tack that Green Organic Dutchman is taking in trying to differentiate itself from its peers. Many of the top companies in the cannabis business right now are doing whatever they can to grab up market share in as many categories as possible, aiming to meet demand from every category of customer and product line. With efforts to concentrate on the premium organic market, Green Organic Dutchman is looking to stand out -- and Jefferies sees that as a potentially winning strategy, even as bigger players in the market fight it out over the lower-end mass consumer market.
That's consistent with the overall bullish thesis that Jefferies has about the growth prospects for cannabis more broadly. The analyst company believes that current sales of $17 billion will rise to $50 billion by 2029, split roughly 60% for recreational cannabis products and 40% for medical marijuana. If legalization efforts prove faster than expected, Jefferies believes that the market could expend even further, to as much as $130 billion in its optimistic-case assessment. It also sees companies that can give consumers a wider range of products having an advantage.
Check out the latest earnings call transcripts for the companies we cover.
Concerns about Green Organic Dutchman?
However, not everyone agrees with Jefferies in being bullish about Green Organic Dutchman. Some of the potential issues for investors:
- Green Organic Dutchman's expansion plans are extremely ambitious.
- The company has been later than its rivals in moving forward with some of its strategic plans.
- Despite the promise of edibles and beverages in the cannabis market, some fear that the trend won't be as lucrative as many initially thought.
That said, Green Organic Dutchman has a lot going for it. It's hoping to get to production capacity of 195,000 kilograms, with about 20% of that amount going toward the production of cannabis-infused beverages and edibles. If it can do so quickly and efficiently -- and if the market for high-end products plays out in the cannabis industry -- then Green Organic Dutchman could prove its naysayers wrong.
Understand the risks
There's a lot of optimism about marijuana stocks right now, and analysts like Jefferies that put out positive reports on lesser-known companies like Green Organic Dutchman can expect to get a lot of attention from investors clamoring for information. Jefferies' call is no guarantee that the organic cannabis producer can help shareholders strike it rich, but it does give investors food for thought in considering how best to invest in the marijuana industry.
