Canaccord Genuity analyst Neil Maruoka thinks Canopy Growth Corp. (TSX:WEED) is the “dominant player” in the Canadian cannabis sector, but says the company’s stock is fully valued at current levels.

In a research report to clients Monday, Maruoka initiated coverage of Canopy with a “Hold” rating and a one-year price target of $12.00.

The analyst says Canopy, which was recently added to the S&P/TSX Composite Index, will likely be a major benefactor of legalization and has a balance sheet that could seriously expand its capacity. But in this moment, he thinks the stock looks fully valued compared to its peers.

“Although we believe Canopy may well emerge as the leader of the Canadian cannabis industry, the company currently trades at 12.4x its funded capacity, the highest amongst its peers averaging 9.1x,” he says. “Although we believe its dominant market position justifies a premium, our sum-of-the-parts valuation further supports current trading levels.”

Maruoka says he values Canopy’s medical marijuana opportunity at $6.29 per share, a figure he says provides a floor to its valuation. The analyst acknowledges that the recreational opportunity is much larger than that, but has not in fact happened yet. And with that potential development still waiting in the weeds, he thinks the short term may be more volatile.

“While we appreciate Canopy’s scale and expect that its powerful brands will likely position the company as a dominant player in the emerging recreational market, we do have some reservations about the current valuation and near-term upside for the stock once the bill for the legalization of cannabis is tabled in Parliament,” he says. “If and when this significant industry catalyst is off the table, we see the potential for profit-taking for this fairly valued stock.”

Maruoka thinks Canopy will generate EBITDA of negative $25.2-million on revenue of $40-million in fiscal 2017. He thinks these numbers will improve to positive EBITDA of $38.9-million on a topline of $131-million the following year.

Last year, Canopy Growth Corp. became the first-ever cannabis stock with a billion-dollar valuation. The milestone for the company came just two-and-a-half years after it began to trade publicly as Tweed Marijuana. The company went public through a reverse merger than netted it $30-million. Management set about turning a former Hershey’s chocolate plant in Smiths Falls, Ontario into a marijuana empire.

It wasn’t long before Tweed was making moves that surprised the market. A few months after its public listing, the company announced it would acquire Bedrocan Cannabis, a Canadian licensee of Dutch government-contracted licensed producer Bedrocan BV, in a deal valued at approximately $61.0-million.

By September of 2015, the company had renamed itself Canopy Growth Corp., with the Tweed and Bedrocan brands continuing to operate as distinct entities, an arrangement that was cemented when Tweed struck a three year branding deal with Snoop Dogg a few months later.

More recently, Canopy acquired fellow Licensed Producer Mettrum Health in deal valued at approximately C$430 million.