On April 20, 2017, Cowen and Company, a leading Wall Street investment bank, issued a report that shows the accelerated adoption of cannabis pressuring alcohol volumes, with beer most at risk. Having analyzed 80 years of alcohol and 35 years of cannabis data in the United States, Cowen has predicted that cannabis will continue to pressure alcohol for the next 10 years.
“There is a strong inverse correlation between cannabis and beer, and that in fact has resulted in six consecutive quarters of decelerating beer growth on two-year stacked basis,” said Vivien Azer, Cowen and Company’s managing director and senior research analyst for the beverage, tobacco and cannabis sectors, in a video presentation on the report.
With this in mind, Cowen has downgraded Molson Coors (NYSE:TAP) from a price target of $120 to a price target of $105, and dropped it to a market perform rating, meaning the stock’s performance should range between a negative return of at least 10% and a positive return of at least 15% over the next 12 months.
As Cowen has predicted consumers will continue to migrate from alcohol to cannabis, it has maintained the outperform rating for Kush Bottles (OTCQB:KSHB) and Canopy Growth Corporation (TSX:WEED), meaning these stocks should each earn a minimum positive return of at least 15% during the next 12 months. Cowen has assigned KSHB and WEED price targets of $4.50 and C$15, respectively.
In regards to alternative plays in the cannabis space, Cowen has also maintained an outperform rating for Turning Point Brands (NYSE:TPB) as the company’s tobacco-related portfolio crosses over into the cannabis market with its Zig-Zag and VaporBeast brands. Cowen has assigned TPB a price target of $18.