Nelson Peltz's past investments could pave the way for Aurora Cannabis (ACB) to disrupt the consumer packaged goods (CPG) industry.
Shares of the Canadian cannabis company are soaring on Wednesday, marking double-digit gains for much of the trading day after the announcement of Peltz's new advisory role.
"Nelson is a globally recognized business visionary with a strong track record of constructive engagement to generate accelerated, profitable growth and shareholder value across many industry verticals that are of great interest to us," Aurora CEO Terry Booth commented.
The most obvious vertical that should be of interest to both Aurora and its shareholders is consumer packaged goods.
So Peltz and Aurora are hanging out. Your obvious next thought should be, OK Procter $PG finally has their #cannabis strategy in place... After all biggest CPG company in the world should be moving into the greatest CPG story of this century! @CNBCFastMoney— Tim Seymour (@timseymour) March 13, 2019
"Nelson is the expert in consumer products," Action Alerts PLUS portfolio manager Jim Cramer said. "This is the endorsement that Aurora needs to put it in the big time."
Analysts have seized on the idea, with GMP Securities analyst Martin Landry immediately upgrading Aurora on the Peltz partnership.
"Trian has been involved with a number of consumer packaged goods companies such as PepsiCo (PEP) , Dr Pepper Snapple (KDP) , Procter & Gamble (PG) , Kraft Foods, Heinz (KHC) , Mondelez (MDLZ) , among others," Landry wrote in his update. "We believe he could be instrumental in facilitating discussions with large consumer packaged goods companies."
The raised rating prompted a price target raise from Landry as well, from C$9.50 to C$15 per share.
To be sure, Jim Cramer noted that many of the consumer packaged goods companies that Peltz has dealt with in the past are not yet sold on cannabis.
"The consumer packaged goods companies have to start doing more in cannabis, [but] we know that Coke (KO) and Pepsi are not interested," he acknowledged. "We know that the vice squads are...tobacco is interested, beer is interested because they're trying to cover their flanks."
He noted that the product cannibalization threat to companies like Constellation Brands (STZ) and Altria (MO) are much more immediate than any threat to Coca-Cola or Pepsi. As such, Constellation and Altria have led the way with multi-billion investments in Canopy Growth Corp. (CGC) and Cronos Group (CRON) , respectively, while CPG companies take aim at more immediate threats in seltzer and health foods.
Still, as far as individuals capable of convincing the CPG industry to consider cannabis as a share growth catalyst, Aurora could scarcely have picked a better partner.
Aurora Cannabis is a holding in TheStreet's Stocks Under $10 portfolio. Click here to learn more about this portfolio, trading ideas and market commentary product.
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