Another major Wall Street firm starts covering cannabis as industry gains legitimacy

Piper Jaffray initiated coverage on cannabis producers Tilray and Canopy Growth on Tuesday, joining a short — but growing — list of Wall Street brokerages watching the industry.

While admitting “we still have much to learn in the sector,” analyst Michael Lavery set overweight ratings for both Canadian marijuana companies and told clients to expect attractive growth ahead.

“We do believe the long-term growth opportunities are significant — both from transitioning illicit trade to legal sales, medical sales, and from transitioning sales in health & wellness categories to CBD-infused products,” Lavery wrote. “While timing of further changes is difficult to predict, the pace of further legalization appears to be accelerating.”

Shares of Canopy Growth rallied 3.5 percent in premarket trading following the initiation, while Tilray shares were largely unchanged.

By starting coverage, Piper Jaffray joins a small group of brokerages devoting research to the budding industry. Until now, most cannabis investors — many of which are individuals — had to rely on reports from Cowen analyst Vivien Azer, one of the first from a major firm to cover the sector. Azer issued her 2019 cannabis outlook on Tuesdayand raised her projection for U.S. sales to $80 billion by 2030. [Read more at CNBC]