As cannabis companies continue to transform into publicly traded companies, the next stage of capitalizing on the booming industry has just begun. Marapharm has seen tremendous growth since its inception in 2011, and the company plans to continue its rapid expansion to better serve the needs of the growing legal cannabis industry.
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CGC reserve remains the best pot stock
With Canopy Growth Corp (NYSE:CGC) being one of the biggest names in the Canadian cannabis industry, it might be too obvious for investors to be interested.
After all, Canopy Growth was the first herb producer to be listed on the New York Stock Exchange, and if you’ve been following the company long enough, you know that Canopy Growth stock has been on a bit of a roller coaster over the years.
But that doesn’t mean investors should turn to lesser-known tickers. Some smaller cannabis companies may have higher growth rates, but Canopy Growth Corp is a name investors just can’t ignore.
Let me explain.
Canopy Growth, headquartered in Smiths Falls, ON, Canada, offers cannabis consumers a wide range of products, including dried flower, oil, soft gel capsules, drinks, supplements, topicals and vaping devices.
As previously mentioned, this diversified cannabis and cannabinoid consumer products company is listed on the New York Stock Exchange. In Canada, its home country, the company is listed on the Toronto Stock Exchange under the symbol WEED.
Canada became the first G7 country to legalize recreational cannabis across the country in October 2018. As expected, the market has developed very quickly.
Gradually, Canopy Growth managed to establish a very strong presence in the Canadian market. In fact, the company has the largest market share in the marijuana flower category in Canada. (Source: BofA Securities Consumer & Retail Technology Conference, Canopy Growth Corp, March 9, 2021).
Although the legalization of marijuana in Canada is more than two years old, the market has the potential to become much larger.
For example, less than 50% of Canadian consumers say they buy marijuana from legal dispensaries. The transition from an illegal to a legal market should therefore be a catalyst for legal operators.
Secondly, Canopy Growth Corp offers a variety of cannabinoids, vapes, potions, oils and topical products. These so-called Cannabis 2.0 products could attract new consumers. (Source: Ibid).
And while Canopy Growth is already a leader in the marijuana industry, the company is expanding its presence through strategic acquisitions.
Earlier this year, the company acquired AV Cannabis Inc, better known as Ace Valley. It is one of the leading cannabis brands in Ontario, specializing in ready-to-use products. (Source: Canopy Growth completes acquisition of leading Ontario cannabis brand Ace Valley, Canopy Growth Corp, April 1, 2021).
Ace Valley SKUs complement Canopy Growth’s line of premium vapes, prerolls and chews. Canopy Growth is able to leverage its world-class sales, marketing and distribution capabilities to expand the Ace Valley brand across the country.
In June, Canopy Growth announced the completion of its acquisition of Supreme Cannabis Company Inc. The transaction strengthens Canopy Growth’s brand portfolio with the addition of two leading Canadian brands, 7ACRES and 7ACRES CRAFT COLLECTIVE. (Source: Canopy Growth completes acquisition of Supreme, Canopy Growth Corp, June 23, 2021).
The acquisition of Supreme Cannabis Company also expands Canopy Growth’s production capacity by creating a cost-effective and scalable world-class cultivation facility in Kincardine, Pennsylvania. Management believes the acquisition will create immediate value. The merged company is expected to realize C$30 million in cost synergies over the next two years.
As mentioned earlier, some investors prefer smaller companies because they have faster growth potential. But here’s the thing: Although Canopy Growth Corp is one of the industry’s heaviest performers, its growth numbers are nothing to write home about.
According to its latest earnings report, Canopy Growth reported earnings in the fourth quarter of fiscal 2021, which ended on 31. The month of March ended with sales of C$148.4 million. This amount is 38% higher than last year. For the full year 2021, the company generated revenues of C$546.6 million, up 37% from fiscal 2020. (Source: Canopy Growth Reports Fourth Quarter and Fiscal Year 2021 Financial Results, Canopy Growth Corp, June 1, 2021).
That said, I’m not saying Canopy Growth is perfect. The company suffered a net loss in its fourth fiscal quarter and for the full year 2021. But thanks to the company’s efforts to cut costs, the situation could improve significantly in the near future.
Mike Lee, chief financial officer of Canopy Growth Corp, said the company’s cost-cutting program is expected to generate $150 million to $200 million in savings over the next 18 months.
…We remain committed to being profitable by the end of fiscal 2022 by continuing to invest in an organization focused on knowledge, innovation and capturing the U.S. market, Lee said. (Source: Ibid).
Canopy Growth Corp (NASDAQ:CGC)Stock chart
Graph courtesy of StockCharts.com
Like many other stocks, Canopy Growth’s stock caught the attention of investors during the meme craze earlier this year. The company’s share price reached a parabolic high in early February, but has since lost most of its ground.
CGC stock seems to be consolidating at the moment. It is now at the same level as last November.
Given Canopy Growth Corp.’s potential to benefit from opportunities for revenue growth and cost synergies from recent acquisitions, as well as its current year-end profitability target, investors in Canopy Growth stock might want to take a closer look.
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