On Monday, BofA Securities updated its outlook on Cronos Group (NASDAQ:CRON), a company operating in the cannabis industry, by increasing the price target to $2.50 from the previous $2.00. Despite the adjustment, the firm maintained its Underperform rating on the stock.
The new price target reflects a cautious optimism regarding recent developments in the cannabis sector, such as the increase in medical cannabis prescriptions in Germany, potential regulatory and prescription changes in Israel, and recommendations from a Canadian panel. These developments are seen as positive for the industry, yet the firm advises investors to temper their expectations due to the historically slow progress of cannabis legalization and market growth.
BofA Securities highlighted that while changes in regulations in Germany and Israel are expected to boost medical cannabis sales over time, and Canada might alter its cannabis rules within the next 12 to 18 months, there is still a cautious stance regarding US reform. The firm notes that an election year in the US typically contributes to legislative gridlock, which could delay any significant reform efforts.
The analyst from BofA Securities emphasized that the regulatory changes are more likely to influence market sentiment in the near term rather than lead to an immediate increase in sales. For a more substantial impact on the cannabis market, the analyst believes that US federal reform is necessary to both attract institutional investors and enhance the sales and profit potential for companies like Cronos Group.
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