Canopy Growth Is a Solid Marijuana Stock but currently overpriced
Marijuana stocks are likely to outperform this year, buoyed by seven U.S. states that have already legalized marijuana, while the other 10 states will discuss pot change in 2019. In addition, the Canadian authorities could authorize weed this year, as black market is estimated around $7 billion. Future fundamentals for marijuana stock also appears strong, thanks to the potential growth in legal marijuana demand.
CGC recently entered into a conditional deal with Acreage that is a head scratcher. They agreed to pay 3.6 billion for a company that only has a market cap of 935 million. Paying this huge premium doesn’t make a lot and right now the stock is being pumped up.
Marijuana sales are likely to increase by 178% to $20.6 billion by 2020, with a compound yearly development rate of 29%.
Canopy Growth Corp (CVE:CGC) is a diversified company, operating through its subsidiaries, including Tweed Inc., Tweed Farms Inc., and Bedrocan Canada Inc. The company has strong penetration in Canadian markets. It supplies pot to half of Canada’s present therapeutic cannabis base following the acquisition of Mettrum Ltd. The Canadian medicinal cannabis industry pulled in $869.0 million in lawful deals in 2016.
With the keen interest of Canadian Prime Minister, legal marijuana sales are anticipated to stand around $22.6 billion in the coming years. To place that into viewpoint, Canopy Growth is set to capitalize on growth opportunities.
This year, it altered its stock ticker to WEED, and continues to trade on the TSX. The company has a market capitalization almost $1.0 billion. Its revenue in the latest quarter increased 245% over the same period last year, while its revenue enlarged 22% sequentially to $8.5 million. It sold over one metric ton of marijuana in the latest quarter.
Moreover, the company has the potential to turn a strong revenue growth into big profits. Its net income was standing around $5.4 million, relative to earnings of $3.9 million over the prior year period. It also appears in a strong cash position to invest in growth opportunities, thanks to cash in hand of $45.5 million at the end of most recent quarter.