Is buying Canopy Growth Stock a good idea in 2020? Do you want to be part of the most extensive traded marijuana stock worldwide? I bet the first answer you can think of is "yes, of course, you had me at marijuana.”
But hang on a second! Let's continue with the article and analyze the positives and negatives of the canopy growth stocks first.
What is Canopy Growth Corp Stock?
Canopy Growth (CGC) stock is the biggest and most popular cannabis corporation in the world. Although based in Canada, Canopy growth corp stock is determined to go global. CGC already operates on five continents in fourteen countries.
Canopy Growth Corp, through its affiliates, is the licensed medical marijuana producer in Canada.
This company produces, grows, and sells medical marijuana. It runs several brands and diversity reinforced by more than half a million square feet of greenhouse and indoor marijuana production.
It sells its medical marijuana under many different brand names. Some of which include Bedrocan, Tweed, and Mettrum. Most of the revenue comes from Tweed and Bedrocan selling medical marijuana in Canada.
Last year will probably go down in history as the most crucial year in the history of the legal cannabis movement. As 2018 came to an end, Canada had legalized recreational marijuana.
More U.S. states had given the green light to marijuana in some capacity. And President Trump had signed the U.S. farm bill.
Thus legalizing hemp and hemp-based cannabidiol. Ultimately, the legal cannabis industry got validity more than ever and became an authentic business model for investors.
However, it was such a great year for most marijuana stocks. After two years of unbelievable gains, a lot of investors got double-digit percentage losses.
Nevertheless, this did not affect the most extensive marijuana stock according to market cap, Canopy Growth Corporation Stock (NYSE: CGC).
So let's scroll back to the original question should you invest in Canopy Growth Stock? In any situation or argument, there are always two sides to the story, so let's look at both.
Reasons why Canopy Growth stock is a good investment for 2020
The Constellation Brands' (NYSE: STZ) $4 billion equity investment into Canopy Growth Stock (corp) (announced in mid-August then closed in November), is one Major Reason to have Faith in Canopy Growth Stock.
It was the third time since October 2017 that Constellation purchased convertible bonds or made a direct investment into an indirect Canopy Growth stock, which escalated the company's ownership stake to 37%.
There are many benefits associated with this combination.
First of all, Constellation Brands will come with its marketing expertise and of course, its deep pockets to drive Canopy Growth stock into new markets. Keep in mind that Constellation Brands received 139.7 million warrants as well, with its equity investment.
Therefore, if exercised, it could increase its equity stake to 56%.
Indicating that Canopy Growth stock might as well be an acquisition objective for Constellation Brands for the next few years. Therefore we can only assume that if acquired we will see a healthy premium over Canopy
Growth Corporation’s present situation.
Now Canopy Growth has enough cash in hand to make sure developments. That includes; building up its existing product line, expanding into international markets.
Developing new products, and acquiring complementary businesses. Ultimately this will build a healthy foundation under Canopy Growth Stock’s current market cap.
According to management, Canopy Growth Corporation has an objective to reach 5.6 million square feet of licensed capacity, which can produce an estimate of 500,000 kilograms at the highest yield.
Would put Canopy down as the second-largest producer regarding annual volume. Consequently attracting Canadian provinces and overseas countries who want to secure long-term supply commitments
Canopy Growth Corp Stock’s infrastructure and sales channels are incomparable, as well. Canopy owns the most popular brand in the country (Tweed).
Hence it has plenty of ways to reach consumers, either through online sales channels or owned retail locations.
Reasons to stay away from Canopy Growth Stocks
There is no doubt that Canopy Growth Stocks and its peers will bring triple-digit sales growth in 2020, and maybe even 2020 when production comes online.
The problem is that the company will be so focused on developing its brands and expanding in all possible areas that it may not have the opportunity to make a profit in 2020. Mostly, as marijuana is legal in Canada, earnings are essential. And by the looks of things, Canopy may have a bad year.
Canada’s pot shortage
Canopy Growth stock (corp) can still be a victim of the regulatory red tape that's blocked supply. It has taken almost a year, on average, for growers to gain approval for a sales permit from Health Canada, with the cultivation licensing taking several months.
As a result, there have been supplying shortages in over half of all Canadian provinces. Such deficits can push consumers back to the black market. Moreover, that will effortlessly undercut legal sales networks on price and do not have licenses or permits to wait.
As we have established until this point, there are a lot of excellent reasons to purchase shares of Canopy Growth Stock and only a few ideas to stay away.
So what do you do as an investor? With Canopy Growth stock has given up all the premium it got after the Constellation Brands' deal announcement, I would consider the company value right now.
However, it is wise to do your evaluation given some points mentioned above and make an informed decision. Good Luck!