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Merrill Lynch launches cannabis sector coverage, assuming US legalization

Bank of America Merrill Lynch deepened its interest in the cannabis industry by initiating coverage of the growing sector less than a year after it funded Constellation's multi-hundred dollar investment in Canopy Growth. The report, by analyst Chris Carey, predicts two events can lead to a paradigm shift: Canada reaches marijuana oversupply in 2021 , which would lead to lower prices and accelerate consolidation. US legalization. "Significant, if legalization happens or not, we consider the prospect of legalization, an event that can lift US asset prices, calls on Canadian companies to accelerate US strategies and see some notices of agreement in the United States before legalization" the report states. The predetermined call was made the day before Canopy Growth hit a landmark to buy New York-based Acreage Holdings for $ 3.4 billion – pending US legalization. Canadian companies on the Toronto Stock Exchange can now enter the United States via ownership that does not become active until US federal law changes. If the US were to legalize medical cannabis federally, the high values ​​of " " International Strategy Now Critical " The report said that the overall market share of the 14 largest Canadian cultures could exceed The domestic market consumption by mid-2021, and international strategies are now critical, as the Canadian market is small in relation to global opportunities. "There are over 50 publicly traded Canadian cannabis licensed producers, too many for a cannabis market, Canadas can size according to our opinion "according to the report. Bank of America…

Bank of America Merrill Lynch deepened its interest in the cannabis industry by initiating coverage of the growing sector less than a year after it funded Constellation’s multi-hundred dollar investment in Canopy Growth.

The report, by analyst Chris Carey, predicts two events can lead to a paradigm shift:

  • Canada reaches marijuana oversupply in 2021

    , which would lead to lower prices and accelerate consolidation.

  • US legalization.

“Significant, if legalization happens or not, we consider the prospect of legalization, an event that can lift US asset prices, calls on Canadian companies to accelerate US strategies and see some notices of agreement in the United States before legalization” the report states.

The predetermined call was made the day before Canopy Growth hit a landmark to buy New York-based Acreage Holdings for $ 3.4 billion – pending US legalization.

Canadian companies on the Toronto Stock Exchange can now enter the United States via ownership that does not become active until US federal law changes.

If the US were to legalize medical cannabis federally, the high values ​​of “

” International Strategy Now Critical “

The report said that the overall market share of the 14 largest Canadian cultures could exceed The domestic market consumption by mid-2021, and international strategies are now critical, as the Canadian market is small in relation to global opportunities.

“There are over 50 publicly traded Canadian cannabis licensed producers, too many for a cannabis market, Canadas can size according to our opinion “according to the report.

Bank of America Merrill Lynch, based in Charlotte, North Carolina, is estimated” a global industry of $ 166 billion emerges from the shadows “

Europe follows 25%, with Asia (21%), Africa (9%), Latin America (6%) and Oceania (2%). ala addressable global cannabis market. . The total addressable market includes regulated and illegal markets.

Canada accounts for only 3% of that market, the main driver of companies seeking international growth.

“We expect the illegal market to lose shares in the legal market in North America, but the rest of the world will remain dominated by an illegal market,” Carey writes.

The potential disturbance can get an even bigger upside.

“We estimate that consumer categories generate $ 2.6 billion a year in revenue can be disturbed by cannabis, from health / well-being to alcohol,” the report noted.

Global Developments

In the report, the US Food and Drug Administration’s approval of Epidiolex was called “an important step” in medical cannabis legalization.

“Another critical development for the medical cannabis sector is taking place globally,” Carey wrote.

He quoted the January Health Decisions by the World Health Organization to recommend cannabis redeployment, remove it from Schedule IV of the 1961 Drug Control Convention and move it to a much less restrictive category.

A third critical development, Carey noted, came in February when the European Parliament called for a uniform definition of medical cannabis.

Bank of America Merrill Lynch initiated coverage of industry leader Aurora Cannabis, Canopy Growth, Cronos Group, Green Organic Dutchman, Hexo Corp and Supreme Cannabis.

Matt Lamers can be reached at [email protected]

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