Canopy Growth Corp (NYSE: CGC) hasn’t been having the best of times int he market, as is the case with cannabis stocks across the board. It seems as though the cannabis bubble built up until October 17, 2018, when Canada officially legalized adult-use cannabis. Since then, stocks in the sector have been struggling. Nonetheless, I believe that we are nearing the end of the declines for some cannabis stocks and that one in particular represents an incredible opportunity. Today, we’ll talk about:
- The opportunity represented by CGC stock;
- what we’re seeing from the stock today; and
- what we’ll be watching for ahead.
Why CGC Represents A Compelling Opportunity
As mentioned above, I believe that Canopy Growth represents a compelling opportunity. There are several reasons for my views on this. The most important include:
First and foremost, the size of the market is absolutely massive. In Canada alone, the recreational cannabis market is expected to grow to be anywhere between $6 billion and $9 billion per year over the next several years. On the medical front, Canada’s projected annual cannabis revenues come in at $3 billion. So, in Canada alone, the potential size of the cannabis market is between $9 billion and $12 billion. Yes, that’s massive, but that’s just in Canada, the home country of CGC.
While cannabis is not legal in the United States, many argue that it will become legal in the country relatively soon. Ultimately, opinions with regard to cannabis use are changing and the United States seems more willing today than every before to have this conversation. Should cannabis become legal in the United States, the market would be absolutely massive. Considering that cannabis will likely have a market about the size of the alcohol market in the States, it could be as high as $100 billion in revenue per year or more! Sure legalization in the States may be years off, but investing is a long run gain, and the argument here is for CGC as an investment, not a trade.
Bringing in other regions that are currently seeing reform in cannabis regulation, the market continues to grow exponentially. In fact, on a global basis, some estimate that within the next few years, the cannabis industry could generate $250 billion in global sales per year.
CGC Is Arguably The Top Contender In Its Industry From A Sales And Investment Interest Perspective
While there are some big name contenders in the industry, none of the other names are quite as big as Canopy Growth. The company has attracted incredible investment interest, including a $4 billion investment from Constellation Brands (NYSE: STZ). When it comes to sales, the company generated $70 million in Canada over the past year. That’s massive considering that when you combine the second and third contender revenue, Tilray and Cronos, they produced less than $45 million in combined sales in the same period.
Global Reach Is Growing
Moreover, while CGC is a Canadian company, the company’s reach goes far beyond Canada. In fact, there is no other cannabis company that has a larger global footprint. This footprint is filled with a wide portfolio of recreational and medical brands and its R&D spend is second to none. All in all, the company isn’t working to become a global cannabis leader, it is the global cannabis leader.
Addressing The Bubble Argument
Many argue that like the crypto space, cannabis was in a bubble, and that bubble has popped. As a result, we’ll see long term declines. Well, I agree to an extent. Yes, values in the cannabis sector, including that of CGC climbed too high too fast, and the bubble did burst back in October. However, I don’t agree with the idea that there’s no bottom here.
Sure, some of the little known cannabis stocks may not find a bottom for a long time. However, we have to remember that even when bubbles crash, there are great long-term opportunities created. Think about it this way, during the tech bubble, Amazon, and Google were created as long term, highly profitable opportunities.
During the cannabis bubble, many companies may fall into the abyss. However, cannabis is a tried and true product with plenty of use cases and consumer demand. The industry isn’t going anywhere and while the industry is hurting, clear leaders are likely to start to emerge soon. Of these leeders, CGC is likely to be the top!
What We’re Seeing From The Stock
While I do see today’s dip as an opportunity, Canopy Growth is falling in the market. As is just about always the case, our partners at Trade Ideas were the first to alert us to the declines. Currently (2:42), CGC is trading at $31.68 per share after a loss of $1.88 per share or 5.60% thus far today.
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What We’ll Be Watching For Ahead
Moving forward, the iWatch Markets team will continue to keep a close eye on CGC. In particular, we’re watching for the stock to reach the bottom and emerge as the leader of a sector that has potential to lead to incredible long term growth. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
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