Top Canadian cannabis stocks, including Tilray Inc TLRY, Aphria Inc APHA and Aurora Cannabis Inc ACB 0.11%, have been red-hot in the last six months.

On Friday, Cantor Fitzgerald analyst Pablo Zuanic said Canadian cannabis penny stock Auxly Cannabis Group Inc CBWTF is “arguably the best value” among Canadian legal producers.

The Auxly Analyst: Zuanic has an Outperform rating and 69-cent price target for Auxly, representing more than 100% upside from its current level of around 30 cents.

The Auxly Thesis: Auxly is now the fifth-largest Canadian LP in terms of domestic recreational sales, accounting for about 4% market share in the fourth quarter of 2020.

Hifyre data suggests Auxly’s retail sales dropped about 10% in the first quarter of 2021 in what was a difficult quarter for the Canadian market as a whole.

Vapes represent about 71% of Auxly’s sales, and Zuanic estimates the company holds about 21% market share in the segment. Flower sales accounts for another 12% of Auxly’s business.

The company’s management has suggested Auxly will reach break-even EBITDA by the end of 2021.

“In our view, fundamentals are not reflected in the valuation (1.5x CY22E sales vs. 6-16x for the four larger LPs (based on our estimates), nor is the optionality from Imperial Tobacco (MB.LON/nc) owning convertible debt that could give it a 19.9% stake in the company,” Zuanic said.

The analyst said he anticipates Auxly will list on a U.S. exchange at some point, which should be a bullish catalyst for the stock.

He also said Auxly has relatively low execution risk compared to other mid-sized Canadian cannabis companies given its strong 2020 numbers, including 45% sequential growth in the fourth quarter.

Benzinga’s Take: Cannabis stocks will likely continue to be volatile in the near term while the industry matures. Long-term investors should monitor the progress of U.S. state-by-state and federal legalization efforts and should consider diversifying into several different U.S. and Canadian names rather than putting all their cannabis eggs in one basket.

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