CANOPY GROWTH - THE CANNABIS LEADER (3 REASONS WHY!)
So what makes Canopy Growth the most valuable cannabis company on the planet! Does this leadership position make it the best investment in the expanding cannabis sector or the worst? Don't answer now because in 3 minutes time you'll be in a much better position to say!
In November, Canopy recorded a record quarter for revenue with sales growing 77% year-over-year. The company is growing sales faster than the likes of Tilray & Aurora Cannabis despite having almost double the annual revenue... Impressive!
In fact, only Aphria currently generates more revenue than Canopy ($470m vs $370m per annum) however Canopy is growing revenue 50% faster than Aphria! That said, Canopy Growth's... Growth 🤔 is far from guaranteed. In fact, the company's earnings and revenue growth is as wild as any cannabis company out there! Over the past 4 quarters, Canopy has actually reported year-over-year declines in revenue TWICE! Therefore just because last quarter was a blowout, be careful!
Canopy Growth has the most cash in the industry thanks to a $4b investment from Constellation Brands. This has allowed the company to aggressively market it's products and create some of the most popular brands in Canada! It has also given Canopy the funds to expand globally via acquisitions including BioSteel sports & Acreage!
However, it's worth noting that despite Canopy having over $1b in cash, the company has burned through $2b since November 2018! Therefore, the company cannot keep outspending competition for much longer and will have to make its recent acquisitions count! Check out how Canopy Growth's fundamentals compare with other cannabis stocks below 👇
The major reason why Canopy Growth is the most valuable company in the cannabis industry is thanks to its partnership with Constellation Brands! The beverage giant is the largest beer importer in the US and owns brands including Corona & Mexico's largest brewery Modelo!
Constellations network will not only allow Canopy to gain access to markets all over the world but the marketer of beer, wine and spirits will be able to give Canopy the footprint for dominating the cannabis beverage market!
Although business is growing fast, right now Canopy Growth is trading around 6x higher than most of their major competitors on a price-to-sales ratio (see below)
Canopy deserves a higher valuation than its peers based on some of the reasons outlined above however 6x more expensive is steep and perhaps we could see the stock lag if we start seeing the competition start to strike big partnerships and post a few good quarters! So if you had to pick a favourite to succeed in this cannabis industry it would surely be Canopy growth! However, the company's value already reflects Canopy's advantages. Therefore, Canopy may not offer the 10x type of gains that other smaller cannabis stocks perhaps do! However, the stock looks like a safe bet for investors banking on the expansion of the cannabis market & legalisation in the US... Where legal cannabis sales are expected to triple to $41b over the next 3 years!
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Disclaimer: All trading involves risk. Only invest money that you can afford to lose and remember that past performance doesn’t guarantee future results. Everything posted by me is for educational purposes only. I am not a financial advisor and no information on this website or any accounts linked with myself should be considered as financial advice. Remember, all trades are at your own risk.
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