At the start of the year, following Joe Biden’s presidential win and the Dems taking control of the Senate, hopes were high that marijuana reform at the federal level was just around the corner.

Accordingly, investors took the developments as a sign to load up on shares of Canadian cannabis stocks – favorable U.S. legislation would provide companies from north of the border with a way into the far more lucrative U.S. market. But progress has stalled, and at the same time, the fight over market share and pricing pressure in the Canadian cannabis industry remains.

In the meantime, investors have headed to the exit gates. Shares of Canopy Growth (CGC), for instance, sit 50% beneath February’s yearly highs.

However, MKM analyst William Kirk says it’s time for a rethink. The risk/reward equation is now “very favorable,” and merits a change to Kirk’s model.

As such, the analyst upgraded CGC from Neutral to Buy. Kirk has a C$55.00 (US$45.70) price target for the shares, implying investors have 75% upside potential from current levels. (To watch Kirk’s track record, click here)

That’s not to say all is plain sailing. Ahead of Canopy’s F4Q21 (March quarter) results on June 1, Kirk expects the results will reflect – as suggested by peer Aurora’s 37% sequential decline in recreational revenue – a “difficult environment.”

However, it is in the following quarter and beyond where Kirk expects the company “to return to sequential growth and have better aligned its supply chain/logistics to capture domestic and international demand opportunities.”

What’s more, the depressed valuation no longer takes into account the potential for U.S. legislation, which might be taking longer than anticipated, but still remains on the table. And Kirk lists a couple of reasons why the U.S. CBD market is where the “sales narrative” is heading: “1) Martha Stewart gummies are rapidly gaining distribution and recruiting new consumers (1/3rd new); and 2) BioSteel expands throughout Constellation Beer's Gold Network (Constellation owns a big chunk of Canopy).”

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Kirk also believes the recent Southern Glazer's Wine & Spirits distribution deal for the CBD beverage portfolio is being “underestimated” by investors.

“Southern offers Canopy a singular, national relationship, a huge advantage in a dynamic regulatory environment,” the analyst further said.

So that’s MKM’s take, but what does the rest of the Street think lies ahead for Canopy? The results are a bit of a conundrum, actually. The analyst consensus rates the stock a Hold, based on 2 Buys, 5 Holds and 1 Sell. However, the $32.52 average price target suggests shares will appreciate ~25% in the year ahead. (See CGC stock analysis on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.