A second quarter he characterizes as a “slight miss” isn’t dampening GMP Securities analyst Martin Landry’s enthusiasm for Canopy Growth Corp (TSX:WEED).

On Tuesday, Canopy Growth Corp reported its Q2, 2018 results. The company lost $1.61-million on revenue of $17.6-million, a topline that was up 107 per cent over the same period last year.

“With our objective to win and retain significant future market share, and backed by the recent $245-million investment from Constellation, we remain focused on the expansion of our cultivation capacity, extraction platform and finished branded products programs,” said CEO Bruce Linton. “The historic cannabis supply MOU that we signed during the second quarter with the province of New Brunswick confirmed our long-held belief that investment in brands, quality and scale coupled with investing in the people and communities we believe in across Canada would leave us well positioned to serve provincial supply needs. We are hopeful to see more and more provinces make similar decisions to pursue the most reliable, varied and high-quality products available in the sector. Starting with the 27 provisional patents that have been filed to date, our research affiliate Canopy Health Innovations seeks to define the breakthrough cannabis-based medical therapies that we could commercialize globally. Our relationship with Constellation and the commitment to work together to develop and market regulated recreational cannabis-based beverages, when and where they are federally legal, is a critical step in our move up the value chain. Perhaps most importantly, we are strongly aligned in our cultures and our view that industry has a role to play in defining acceptable business practices as the cannabis industry exits prohibition. With investments and capacity offtake agreements in place with quality domestic production assets and several others in negotiation, our Canopy Rivers subsidiary is analyzing global investment opportunities, another reflection of the growing international scope of our business.”

Landry says the quarter fell slightly short of his expectations, but says there are several reasons to like Canopy right now.

“Our positive stance on Canopy Growth is supported by the following,” the analyst today wrote.

“1. Constellation partnership reinforces leadership. The investment by Constellation Brands catapults WEED into a league of its own. Canopy’s aggressive expansion plans are now fully funded. The company also has a credible partner on which it can draw resources to accelerate its go-to market strategy for the recreational market in Canada. Both of these increase the company’s first mover advantage and supports our expectation that the company will capture a leading share of the Canadian recreational market.

2. First mover advantage generates brand awareness. Bedrocan, Mettrum Health and Tweed were amongst the first brands to be established in 2013 and 2014, and therefore benefit from strong brand awareness. In our view, Tweed is currently the Canadian brand that is best positioned to transition into the recreational market which is key given potential limitations on advertising.

3. Strong international platform. Canopy has crafted one of the widest international footprints in the industry with investments in Germany, Denmark, Spain, Brazil, Chile, Australia and Jamaica. As global medical cannabis programs develop, this platform should open multiple distribution opportunities for Canopy, providing optionality for the company to allocate its expected large production capacity to the most profitable sales channels.”

In a research update to clients today, Landry maintained his “Buy” rating, but raised his one-year price target on the stock from $17.00 to $22.00, implying a return of 10.2 per cent at the time of publication.

Landry thinks Canopy Growth Corp will generate EBITDA of negative $17.5-million on revenue of $74.7-million in fiscal 2018. He expects those numbers will improve to EBITDA of positive $67.2-million on a topline of $342.8-million the following year.