Despite some pullbacks, marijuana stocks have been on fire lately due largely to the growing prospects of decriminalization at the federal level. But one analyst is bucking the bullish trend with a recommendation cut on one of the top names in the sector, Canopy Growth (CGC -1.29%).

On Wednesday, Jefferies prognosticator Owen Bennett downgraded his recommendation on the company to underperform (sell) from the previous hold, although he did lift his price target to $23.03 per share from the previous $21.10. That's around 35% below the current level.

Marijuana flower being trimmed.

Image source: Getty Images.

"Bulls will argue Canopy's multiple is deserved given possible near-term U.S. entry," Bennett wrote. "While its U.S. optionality is the best among Canadian names, it is still too expensive for us. Canopy is loss making and acquiring a loss making [multi-state operator], while the fundamental outlook at other U.S. incumbents is far superior."

At present, Canadian companies cannot directly sell marijuana in the U.S., as this is a violation of federal law. Democratic leaders, including Vice President Kamala Harris and Senate majority leader Chuck Schumer, have pledged to decriminalize the drug. This effort seems to be gaining momentum.

Canopy Growth has a deal in place to acquire Acreage Holdings (ACRGF), the MSO Bennett referred to, when and if full legalization (as opposed to decriminalization) occurs. Last year, Canopy Growth and Acreage revised their deal, essentially lowering the total price drastically in exchange for the former company providing an up-front payment.

Perhaps investors were taking Bennett's recommendation downgrade to heart. In midafternoon trading on Wednesday, Canopy Growth stock was essentially flat, lagging behind the 1% gain of the S&P 500 index.