STIFEL – Initiating Coverage of Canadian Cannabis Companies:  WEED.CN –  ACS.CN  –  CRON.CN –   TLRY

We are initiating coverage of the cannabis industry and specifically Canopy Growth (WEED.CN, Buy, C$ 55.00), Aurora Cannabis (ACB.CN, Hold, C$10.56), Cronos Group (CRON.CN, Hold, C$ 19.33), and Tilray (TLRY, Hold, $36.50). We are bullish on the prospects for growth for the cannabis industry and especially through the Canadian Licensed Producers (LPs). We believe these companies represent the best investable opportunities in a global cannabis industry that we estimate could reach $200 billion in value. These four companies hold a lead in the legal Canadian market, maintain advantaged access to capital, and have established partnerships with global companies. Valuations remain robust at 10x EV/ Sales (FY21E), but supported by the global growth opportunity we estimate. We believe Canopy Growth represents the best investable opportunity in cannabis with definitive category leadership, C$4 billion cash on hand offering significant optionality, and the best position to attack the $100 billion U.S. opportunity.