Vivien Azer of Cowen & Co. holds a unique distinction as Wall Street’s first cannabis industry analyst. Her early recognition of the sector, initiating coverage just before Canada’s legalization of recreational cannabis, positions her as a true pioneer in understanding the burgeoning cannabis market. Today, with numerous cannabis producers achieving significant investor returns and listing on major exchanges like NYSE and Nasdaq, Azer’s insights are invaluable. She currently favors stocks with substantial growth potential, anticipating increased cannabis consumption as legalization expands globally.
Azer articulates a compelling vision for the cannabis industry, stating in a Barron’s interview, “Ultimately, I view cannabis as a traditional consumer-staples category.” This perspective underscores the normalization and growing acceptance of cannabis. She further emphasizes the inevitability of legal cannabis, noting, “The reality of legal cannabis is increasingly apparent with every new country that capitulates in its cannabis policy.”
Based on her analysis, Azer recommends focusing on producers poised for significant growth. Her top picks include Aurora Cannabis Inc. (ACB), Canopy Growth Corp. (CGC), and Tilray Inc. (TLRY). Beyond direct cannabis producers, she also highlights major conglomerates like Constellation Brands Inc. (STZ) and Altria Group Inc. (MO), which have substantial stakes in cannabis companies, as strategic avenues to capitalize on the industry’s long-term expansion without direct investment in Pioneer Cannabis cultivators.
Top Stocks to Ride the Cannabis Wave:
- Aurora Cannabis Inc. (ACB)
- Canopy Growth Corp. (CGC)
- Tilray Inc. (TLRY)
- Constellation Brands Inc. (STZ)
- Altria Group (MO)
Source: Cowen & Co., via Barron’s
The Rise of Cannabis as a Consumer Staple
Azer’s pioneering work at Cowen & Co. began in September 2016, when she and nine colleagues published the firm’s inaugural comprehensive report on cannabis. At that time, she stood alone as Wall Street’s only analyst at a major firm dedicated to this emerging sector. Her foresight is further demonstrated by her market projections. Barron’s reports that Azer anticipates combined legal and illegal cannabis sales in the U.S. reaching $80 billion annually by 2030. For Canada, she forecasts a $12 billion Canadian dollar market by 2025. Looking beyond North America, Azer envisions a $31 billion market by 2025 in the 43 countries either already legalizing or in the process of legalizing cannabis. These figures highlight the immense global growth potential within the pioneer cannabis industry.
First-Mover Advantage in the Pioneer Cannabis Market
Azer emphasizes the significant advantage held by Canadian operators with international reach. These pioneer cannabis companies benefit from superior access to capital and licensing frameworks. Within Canada, Aurora Cannabis is Azer’s premier choice, lauded for its extensive scale and anticipated “inflection to profitability,” projecting positive EBITDA by the June quarter, according to Barron’s. Canopy Growth also earns commendation for capturing 30% of the adult-use market share, alongside its considerable scale, innovative initiatives, and efficient operational logistics. However, she notes that Canopy’s increasing EBITDA losses present a challenge.
Tilray, another favored stock, is acknowledged to trade at a premium compared to its competitors. Azer justifies this valuation by highlighting Tilray’s unique strategy of forging partnerships with established Fortune 500 corporations, such as Anheuser-Busch InBev NV (BUD) and Novartis AG (NVS), the Swiss pharmaceutical giant. These strategic alliances solidify Tilray’s position within the pioneer cannabis landscape.
The expansion of Canadian cannabis giants positively impacts major tobacco and alcohol conglomerates that hold equity in these companies. “Constellation Brands (STZ) possesses a 38% stake and the option to assume majority control of Canopy Growth. This would provide them substantial exposure to the international market opportunity,” Azer explains. She adds, “The same holds true for Altria Group (MO),” referencing Altria’s 45% stake in Cronos, with an option to increase it to 55%. These partnerships represent smart plays for established companies to enter the pioneer cannabis market indirectly.
The Future Trajectory of Pioneer Cannabis
In the U.S., federal cannabis prohibition persists, creating obstacles such as limited access to conventional banking services. Nevertheless, Cowen anticipates the passage of the Safe Banking Act this year. This legislation would be transformative, enabling American cannabis businesses to engage with banks and brokers, thereby removing a major impediment to growth within the U.S. pioneer cannabis sector. The continued legislative progress and increasing global acceptance suggest a bright future for the pioneer cannabis industry and related investment opportunities.
