Two thousand %. That is what your return would have been if you purchased Canopy Development (NYSE:CGC) shares 3 years ago and held on to them. So far this year, the stock is up by 61%. With this sort of sizzling functionality, it is no wonder that investors have taken rather an interest in Canopy Development.
But there is far more to the story for this Canadian marijuana producer than just its earlier stock gains. If you happen to be searching to purchase shares of Canopy Development now, right here are 5 factors you really should know initially.
1. It really is major in Canada’s recreational marijuana market place
Canada’s recreational marijuana market place opened for company on Oct. 17, 2018. With numerous expecting this market place to develop to close to $five billion or far more more than the subsequent handful of years, winning in Canada is tremendously significant for any marijuana producer in the nation. The very good news for Canopy Development is that it is surely a leading winner so far.
In the quarter ending Dec. 31, 2018, Canopy Development racked up recreational pot sales of 57.7 million Canadian dollars (a tiny more than US$43 million). That sales figure is more than two instances greater than what the organization with the No. two market place share, Aurora Cannabis, reported in the identical period.
two. It really is a leading player in international healthcare cannabis markets
As important as Canada’s recreational marijuana market place is, the international healthcare cannabis chance is even higher. Market place study organization Brightfield Group projects that the healthcare cannabis and cannabidiol (CBD) markets in Europe alone will attain almost $10 billion by 2023. Canopy Development is a leading player in Europe as effectively as in other crucial international healthcare cannabis markets.
The organization has operations in far more than a dozen nations spanning 5 continents. Canopy Development narrowly trailed Aurora final quarter in sales to Germany, the most significant healthcare cannabis market place outdoors of North America. It really is also positioned effectively to succeed in other European nations as effectively as Australia and Latin America.
three. It has a huge companion and a huge money stockpile
Likely the most significant competitive benefit for Canopy Development is its connection with Constellation Brands (NYSE:STZ). The huge alcoholic beverage maker, finest recognized for its Corona and Modelo premium beers, purchased a 9.9% stake in Canopy in 2017. Constellation upped its ownership interest in Canopy in 2018 to about 38% with a different $four billion investment.
With Constellation Brands, Canopy Development now has a companion with a effective track record in establishing customer solutions. The organization also has a huge money stockpile (about $three.7 billion at the finish of 2018) to use in expanding globally.
four. It really is jumping into the U.S. hemp market place
Canopy Development cannot enter the U.S. marijuana market place and retain its listings on main stock exchanges as lengthy as marijuana remains illegal at the federal level. On the other hand, thanks to the 2018 Farm Bill that was signed into law in December, the door is now open to the U.S. hemp market place. And Canopy Development has currently jumped by way of that door.
In January, Canopy announced that it had secured a hemp license in New York state and planned to invest up to $150 million to make a significant-scale hemp production and processing facility. The organization plans to expand swiftly into other locations in the U.S., constructing hemp industrial parks comparable to what it is developing in New York. Hemp, which includes hemp-primarily based CBD solutions, has the prospective to grow to be a multibillion-dollar business in the U.S. more than the subsequent handful of years.
five. Its market place cap currently reflects lofty development expectations
Canopy Growth’s market place cap of about $15 billion is by far the highest of any marijuana grower. It also reflects lofty development expectations, taking into consideration that Canopy produced much less than $120 million in income more than the final 12 months.
But Canopy Development may not be as costly as it appears at initially glance. Just before Constellation Brands invested in Canopy, it did some quantity crunching. The alcoholic beverage maker thinks that the international cannabis market place could leading $200 billion inside the subsequent 15 years. Constellation anticipates that Canopy could acquire amongst five% and 15% of that market place.
If these projections are anyplace close to becoming correct, the lofty development expectations baked into Canopy Growth’s share value may not be lofty sufficient.