Andrew Szeto for Tweed Inc.
Canopy Growth Review
Canada’s Canopy Growth is the largest listed pure-play marijuana company worldwide. It focuses on dried cannabis, oils, concentrates, hemp, and soft gel capsules. Many investors get attracted to the company due to its size. Compared to other cannabis firms, Canopy Growth remains aggressive with their acquisition strategy.
Canopy Growth Corporation (WEED) just completed acquiring Hiku Brands Company (also based in Canada) last September 5, 2018. The deal was worth almost $270 million. Hiku grows and sells medical and recreational pot. Canopy Growth also purchased Mettrum Health in 2016 for $430 million. Other gains of the Canadian company include Latin America medical marijuana subsidiary Spectrum Cannabis Colombia for $46 million.
One significant stimulus for this company is the legalization of recreational pot by the Canadian government. Unhampered selling of adult marijuana can bring in additional revenues of between $5 and $7 billion in per year. Canopy Growth, as well as other companies operating in the North American region, are looking forward to capitalizing on large portions of the market.
Concerns and Possible Risks
All businesses face different kinds of risks. An apparent concern for this enterprise is its value of around $1.7 billion. There is no guarantee that sales, competitive size advantage, and net shortfalls can justify such valuation. Consider FY 2017. Sales of Canopy Growth increased three times more than the preceding year. Yet, the total was only $31 million.
It is true the corporation attained adjusted revenues during the first three quarters of that fiscal year. Acquisition costs brought the full-year results to a substantial loss. The company’s valuation narrowed the list of likely investors who were planning to put in money. It was not a plus point for Canopy Growth. Even then, shares increased around 127 percent in more than three months. At present, the cannabis firm has a market value worth $899 million.
Investors remain bullish. Recreational weed use becomes legal in Canada this October in accordance with the Cannabis Act. Individuals, more than 18 years of age can possess a maximum of 30 grams of pot. Adults can also cultivate up to four plants inside their residences.
Business owners estimate that legal grass and its derivatives can compete with the alcohol industry. Tourists from the United States and neighboring countries will flock to Canada to buy all the pot they want legally.
This Canadian-based player is the first-ever from the country to trade at the NYSE. And, the enthusiasm continues to grow especially among millennials. In fact, Canopy Growth Corporation stocks closed at a high of $48.87 during the latest trading session showing a +0.43-jump compared to the previous day. The share surpassed the S&P500 gain of 0.36 percent. Which is a promising sign for the company.
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