In January, Cowen analyst Vivien Azer was high on Canopy Growth‘s (NYSE:CGC) prospects. Azer predicted that Canopy’s sales would skyrocket 225% in fiscal 2020, which begins in April. She pointed to Canopy Growth’s industry-leading market share in the Canadian recreational marijuana market as a big plus for the company.
But Canopy Growth is no longer Vivien Azer’s top pick. She now likes Aurora Cannabis(NYSE:ACB) best of all and thinks the stock could jump more than 30% above its current level. Why does a top analyst think that Aurora Cannabis beats Canopy Growth as the best marijuana stock on the market right now?
Capacity is king
Azer’s top reason for liking Aurora Cannabis so much is its production capacity. She wrote to clients that Aurora’s capacity provides the company “with the necessary infrastructure to weather early storms in adult use while continuing to grow higher-value revenues in the medical market.”
This perspective is probably right on target. Aurora Cannabis stated in its fiscal 2019 Q2 updatethat it was operating at an annualized production run rate of around 120,000 kilograms. However, the company said then that by the end of March its annual production capacity would be increased to 150,000 kilograms.
But Azer knows Aurora should be on track to be able to produce around 575,000 kilograms of cannabis per year. That should be enough to top Canopy Growth based on the two companies’ current plans.
The reality in the Canadian marijuana market right now is that capacity is king. That’s not likely to change anytime soon. And if Aurora maintains an industry-leading capacity, the company just might wear the crown instead of Canopy Growth.
Azer wasn’t just focused on Aurora Cannabis’ tremendous production capacity, though. She also liked that Aurora has a presence in 23 countries. Azer thinks this gives the company an inside track to boost its global market share considerably.