The Covid-19 pandemic has abruptly transformed the cannabis business, like the rest of the world’s economy. So analysts are revising their views of some Canadian pot producers, accordingly.

On Thursday morning, Jefferies upgraded Canopy Growth (ticker: CGC) to a Hold, while downgrading Tilray (TLRY) to Underperform. At the same time, Eight Capital lifted Aphria (APHA) to a Buy after that cannabis outfit reported strong financial numbers Wednesday.

“Despite the operational challenges and uncertainty cast over the cannabis industry due to COVID-19,” wrote Eight’s Graeme Kreindler in his Aphria upgrade, “we believe that [Aphria] presents a compelling investment vehicle for exposure to the cannabis industry.”

After Aphria’s report Wednesday of 20% sequential growth in its revenue for the February quarter, with a profit that’s unusual for Canada’s industry, the Ontario-based company’s stock briefly jumped, but opened Thursday barely changed at $3.68.

Kreindler acknowledges that the pandemic will hurt Aphria if consumer spending on cannabis contracts, but he argues the stock is undeservedly cheap compared with those of its rivals. As a multiple of sales, Aphria stock trades at around a 30% discount to the likes of Canopy and Tilray—says the analyst—while going for 40% less than its peers as a multiple of cash flow. He thinks Aphria shares should trade closer to $5.70.

Midmorning Thursday, Canopy announced cash-conserving actions across its global operations. It is exiting business in South Africa and will stop growing in the nation of Colombia. A Saskatchewan grow-house will shut down. Hemp farming in New York state will stop, amid weak demand for the raw material that yields the soothing—and legal—ingredient known as CBD . Canopy Chief Executive David Klein said the moves will result in pretax charges of 700 to 800 million Canadian dollars, when Canopy reports its March quarter results.

At Jefferies, analysts Owen Bennett and Ryan Tomkins have refreshed their cannabis industry forecast in light of the expected impact of Covid-19. They, too, like Aphria. But they are upgrading their rating on Canopy to a Hold after the stock’s recent selloff. In a recession , the company’s strong balance sheet means that it won’t need to raise capital through equity sales, they say. Canopy’s size and inventory position will let it weather supply disruptions. Jefferies thinks Canopy’s $14.50 stock would be fairly valued at $15.60.

Tilray shares have more than doubled recently, as hedge funds trim their short positions—bearish bets in which investors borrow shares and then sell them—amid a short squeeze on the stock’s small float. Even after Tilray’s 8% slide on Thursday morning, to $6.28, Jefferies sees additional downside to a price target of $5. The analysts expect the Canadian producer to lose $1.44 a share this year, and another 80 cents a share in 2021.

Recent runs on Canada’s cannabis shops were a short-lived pantry loading, say Bennett and Tomkins. While vice products like alcohol and cigarettes did well in the post-2008 recession, Jefferies thinks cannabis production could be disrupted by the coronavirus. Cash-strapped consumers may trim their spending, which would exacerbate the price declines that Canadian cannabis companies have already seen.

So while many analysts have forecast industry sales of 3 billion Canadian dollars for that country in 2020, Jefferies now thinks the total will be C$2.3 billion. “[W]e think consensus is expecting too much from an industry where pricing is seeing real pressure and new product launches are unlikely to contribute meaningfully,” say the Jefferies analysts.

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