Azer expects a "material increase" in revenue at Canopy throughout 2019 as supply challenges are addressed. The analysts sees sales jumping from C$239 million in fiscal 2019 to C$778 million in fiscal 2020, a 225 percent rally.
"We remain confident in Canopy's ability to generate such vibrant sequential growth based on the company's seemingly leading share in the market," Azer wrote. Based on her e-commerce analysis, the Smiths Falls, Ontario-based company has a leading 18 percent share of all available units in the market.
Things are looking up for Tilray, too, including the company's recently expanded relationship with Sandoz (a subsidiary of Novartis). CEO Brendan Kennedy said in a December statement that the "agreement represents a major milestone in the movement to provide access to safe, GMP-certified medical cannabis to patients in need across the world."
The company plans to work with Sandoz to supply nonsmokable and noncombustible medical cannabis products where it is legally allowed. Tilray has also said it would partner with global beer giant ABU in Canada, pushing Cowen's revenue estimate to C$120 million in calendar 2019.
"We continue to view the international medical market as one of the primary investment highlights for Tilray, which currently operates in 12 countries," Azer wrote. Its "expanded partnership with Sandoz can help expand reach with pharmacists, physicians and distributors in Tilray's markets, while capturing early share in new medical cannabis markets as they come online."
While cannabis in the United States remains federally illegal, the U.S. market opportunity is quite sizable, according to Azer, with the current illicit market valued at around $40 billion to $50 billion and expected to flourish over the next decade. Sixty-six percent of survey respondents now support legalizing marijuana, according to the latest Gallup poll. That's a record high and was the third consecutive year that support for legalization has increased to record levels.
Cannabis represents a "opportunity" for big tobacco as more and more U.S. states join those that have already OK'd the adult recreational use of cannabis. Cowen looks to North Dakota, Louisiana and West Virginia to come online and highlights Ohio, Florida and Pennsylvania as additional key states to watch.
"After passage of the Farm Bill, CBD will clearly be one of the most topical areas within cannabis over the coming year," Azer wrote. "We expect the category could generate $1.6 billion in revenues over the next year or two, depending on the timing of FDA commentary and the pace of retail acceptance."
The $867 billion farm bill, which was signed into law by President Donald Trump on Dec. 20, includes a provision for industrial hemp legalization that Senate Majority Leader Mitch McConnell, R-Ky., had introduced. The provision removed industrial hemp from the federal government's list of controlled substances, making it a lawful agricultural commodity.
In response to the passage of the farm bill, Canopy CEO Bruce Linton told CNBC that it represents a key "first step" toward the company's expansion into the U.S. market.
The Food and Drug Administration later said that it is looking for "pathways" to legalize the sale of CBD oil and other cannabis-based compounds in food and beverages in a move that could remove one of the last remaining legal hurdles for companies hoping to sell such products across state lines.
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