Canopy Growth stock (CGC) is rising on Friday, thanks to an upbeat note from Piper Jaffray, which sees the industry ramping up in the years to come and favoring larger-scale operators like the Canadian cannabis firm.

The back story. Marijuana stocks have seen plenty of volatility amid ongoing supply shortages, but many have notched big gains as investors—including institutions, consumer-staples giants, and retailers—flock to the industry and create markets in offshoots like CBD oil (which is extracted from the cannabis plant’s flowers).

Canopy Growth stock, which has jumped nearly 60% year to date, has gained almost 80% in the trailing 12-month period. Constellation Brands (STZ), which has a stake in Canopy, has benefited handsomely.

Canada has legalized cannabis, but the drug will likely have a longer road toward acceptance in the U.S., given the nation’s more patchwork approach to marijuana, with individual states making their own regulations for now (and not always moving toward legalization). For now, Canopy Growth is one of the few companies that can trade on major U.S. exchanges, as it operates only in Canada. (Because of the U.S.’s federal prohibition, pot companies that have business in the U.S. are excluded.)

What’s new. Piper analyst Michael Lavery reiterated an Overweight rating on Canopy and a $60 price target, as he sees it in a sweet spot in an evolving industry. He writes that “capacity, scale and execution will continue to matter for the next 12-24 months as growing supply catches up with strong demand in both Europe and Canada, and we consider Canopy well positioned relative to its peers on these measures.”

Looking ahead. While investors are used to supply shortages, in the coming month excess supply may become a concern, as it weighs on pricing. But in the long run, Lavery expects expect “brands and the related pricing power to shape the category, with more value-added differentiated products (edibles, vapes, or beverages) potentially playing a key role.”

Of course, with U.S. and even Canadian regulations still uncertain, it’s a little early to guess the winners, but Lavery argues that Canopy is making the right moves by diversifying its portfolio, especially into beverages.

Nor is the company sleeping when it comes to U.S. legislation. “Given the scarcity and necessity of licenses (at least under current state rules), we believe M&A is a critical part of any U.S. entry strategy,” Lavery writes. “Canopy has cash and could also likely use debt or equity for any potential deal.” Not only does Canopy have the capital wherewithal to do a deal, but he notes that it also has the good manufacturing practice facilities and experience weaving its way through tight regulations in Canada that “could be an important head-start relative to potential U.S. competitors.”

When it comes to marijuana stocks, Canopy’s 50% 2019 jump may dwarf the broader market’s, but its rally hasn’t been as steep as that of rivals like Aurora Cannabis (ACB) and Cronos Group (CRON), and the company scores high marks from analysts. Yet while it might be a safer, more stable bet than its peers, any cannabis investor will have to be willing to endure plenty of volatility. Barron’s has written that it’s too early to make big bets on individual U.S. pot stocks.

Canopy is up 5.5% to $42.30 in recent trading.

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