“We call the bottom on Canadian cannabis stocks.” That is what people will read when looking at the first section in a near 300-page research document from Cantor Fitzgerald analyst Pablo Zuanic. He is making predictions that “green days ahead” for the battered shares that have tried to find their base following Canada greenlighting recreational marijuana.

The Horizons Marijuana Life Sciences Index ETF (HMMJ.TO), which was the initial exchange-traded fund for cannabis shares. Over the past year HMMJ.TO has dropped almost 50 percent. Lacklustre earnings, a steadfast black market, scores of U.S. pot firms listed on Canada’s junior exchange, abrupt boardroom shuffles, and the slow fall off of CannTrust (TRST.TO)(CTST) have collectively discouraged investor enthusiasm for the HMMJ’s core holdings of big Canadian cannabis players.

Zuanic began to oversee six marijuana stocks in a long report released on Monday, all of them among the top ten holdings in the HMMJ.

“We call the bottom on Canadian cannabis stocks and think positive catalysts far outweigh negative ones,” Zuanic wrote in the report.

He started coverage on the following pot stocks :

Aphria ( APHA.TO )( APHA ) with an “overweight” rating and a $10.40 price target

Organigram ( OGI.TO )( OGI ) with an “overweight” rating and a $17.10 price target

Aurora Cannabis ( ACB.TO )( ACB ) with a “neutral” rating and a $5.10 price target

Tilray ( TLRY ) with a “neutral” rating and a $20 price target

Canopy Growth ( WEED.TO )( CGC ) with a “neutral” rating and a $27 price target

HEXO ( HEXO.TO )( HEXO ) with an “underweight” rating and a $2.40 price target

Cantor is anticipating the Canadian market to benefit from more store openings and the start of Cannabis 2.0, as the upcoming launch of a market for derivatives expected in December is being dubbed. Canada has faced a range of barriers since it became the first G-7 country to fully legalize marijuana this past year, including a much slower-than-expected rollout and challenges in turning up production of a new commodity at scale.

“Valuations are at two-year lows, and we deem them attractive based on the long-term opportunity,” he wrote. “The stocks that will outperform will show evidence of a strengthening Canadian franchise [market share, pricing, and margins] and outsized growth versus peers in terms of exports.”

Zuanic views the Canadian recreational market growing to $2.44 billion in sales in 2020 and $4.5 billion by 2022. He anticipates the recreational medical market to grow to $850 million by 2022, with international medicinal cannabis sales touching $2.7 billion that same year.

A number of big-time marijuana cultivators will report third-quarter financial results next week, including Canopy, Cronos (CRON.TO)(CRON) and Tilray.

BMO Capital Markets analysts Tamy Chen and Peter Sklar stated that some of the larger licensed cannabis growers have used cautious language for their near-term revenue predictions.

They also suggest that areas looking to manage their inventory ahead of the release of next-generation pot products, expected to hit shelves in mid-December, may return less popular items to producers.

“Limited warehouse capacity at Ontario and Alberta may have already resulted in product returns, with potentially more to come ahead of the Rec. 2.0 sell-in,” the pair wrote in a research note on Monday. “We also remain concerned about the looming risk of more inventory write-down, particularly if some of the dated flower is ultimately deemed not extraction grade.”

As well Cantor is anticipating the Canadian market to benefit from more store openings and the launch of Cannabis 2.0, as the coming launch of a market for derivatives expected in December is being dubbed. Canada has faced a series of obstacles since it became the first G-7 country to fully legalize cannabis last year, including a much slower-than-expected rollout and difficulties in ramping up production of a new commodity at scale.

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