Canaccord Genuity analyst Neil Maruoka says government restrictions on marketing and branding of legal marijuana could present a challenge to Canopy Growth Corp. (TSX:WEED).

Last Thursday, Canadian Prime Minister Justin Trudeau introduced a bill that would see Canada become the second nation to legalize marijuana. The new legislation, which legalize recreational use by July of next year, would allow adults over the age of 18 to possess thirty grams of marijuana in public and grow four plants within their homes. It also proposed to place restrictions on branding and endorsements, limit product offerings, and designate distribution at the provincial level.

Maruoka says the broad strokes of the table legislation were generally in-line with his expectations and he thinks this “watershed” moment for the industry. And with one notable exception he sees this development as a modest positive for all cannabis stocks in his coverage universe.

“We have increased our expected probability of a legal rec market from 75% to 80% in all our models, resulting in target price increases for most stocks except WEED, which we believe could see greater headwinds to its industry-leading brand strategy; we have therefore increased our recreational WACC for WEED from 16% to 18% (bringing this in line with peers),” said the analyst. “After including the dilutive impact of the recent $24.3 million private placement financing, our target price for WEED is lowered to C$11.50 (from C$12.00). We have made no ratings changes based on this update.”

Maruoka says the company that has fast become known for its brands may have a hard time expanding them under the proposed new laws.

“We believe it is uncertain how much Canopy will be able to leverage its brands given the restrictions in the proposed legislation,” he says.

In a research update to clients Sunday, Maruoka maintained his “Hold” rating on Canopy Growth Corp, but lowered his one-year price target on the stock from $12.00 to $11.50.

Maruoka Sunday raised his one-year price target on Aphria (TSX:APH) from $6.50 to $7.00 while maintaing his “Hold” rating on that stock.

Maruoka raised his one-year price target on OrganiGram Holdings (TSXV:OGI) from $3.25 to $3.40, while maintaining his “Speculative Buy” rating on it.

The analyst raised his one-year price target of Supreme Pharmaceuticals (CSE:SL) from $2.15 to $2.25 while maintaining his “Speculative Buy’ rating on it.

And Maruoka Sunday increased his one year price target on Emblem Corp. (TSXV:EMC) from $3.75 to $3.80 while maintaing his “Speculative Buy” rating on it.