Canopy Growth Corp. (TO:WEED; NYSE:CGC) is the undoubtedly marijuana industry’s 400-lb gorilla.
It was the first unicorn pot stock with a billion-dollar market cap. Now at a $14 billion market cap, it’s twice the size of the second richest MJ company, Aurora Cannabis, and miles ahead of the rest. It’s been a millionaire-maker, too, a stock that has risen from under $3 in 2016 to over $57 today.
It’s the company so well-managed and so desirable that Fortune 500 company Constellation Group has invested billions to own 38% of the it.
Now what? Canopy Growth Corp. (TO:WEED; NYSE:CGC) is already so big, what can more growth add to it?
Quite a lot, we think. This is a company that still has surprises. This past week, it bought Hiku Brands, one of the notable mid-size MJ companies. Just before the acquisition, Hiku won one only four licenses to operate retail stores in Manitoba. Together, Canopy and Hiku will have a wide range of branded products and sales licenses in two Canadian provinces. So far.
Canopy Growth Corp. (TO:WEED; NYSE:CGC) is only company to have supply agreements with every Canadian province.
It has a wide range of branded products that it is now selling into Europe as well as Canada. It has staked out growing operations in Jamaica and Denmark. Lesotho and Columbia are soon to come. It’s exporting to Australia, Brazil, Germany and Spain.
The first giant company in Canada is well on the way to being the leading company on the planet. Not everyone is comfortable with that.
Cautious analysts are giving the behemoth hold or sell ratings now. It’s tempting to follow that lead and avoid Canopy. After all, the stock is up 625% in the last year, it’s already the biggest company in the business, and it hasn’t made positive earnings yet.
The fact is, none of that matters. And that includes the lack of bottom-line profits. Canopy has repeatedly used the cash that comes in to move forward. That’s not a model that is easy for value investors and some accountants to embrace. Negative earnings seems like a failure. They often are. But in Canopy’s case, the company’s expenditures are on assets that keep increasing its potential.
Think Amazon.com, another company that famously eluded mainstream analysts’ understanding as it went for years without net profits, but always growing.
Look at the revenues trend for Canopy Growth. This is what matters—
2015 $1.9 million
2016 $12.7 million
2017 $39.9 million
2018 $77.9 million
That’s history. Growth that great is hard to keep it up after reaching such size. Canopy is no longer a small company where another billion in sales would make a meaningful addition to its coffers.
But Canopy is not planning to maintain the pace—it’s accelerating!
2019 $341 million estimated revenues
2020 $977 estimated revenues.
This kind of success defies traditional analysis. We believe that Canopy is worth pursuing. At today’s high prices. For the cautious investor who likes to use stop losses, there’s a natural point of support at $47.50. You could wait a bit to see if the price pulls back further, but don’t count on it.
DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of MMJReporter.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure
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