3 Arguments for and Against Buying Canopy Growth

Once considered a taboo industry, marijuana is now big business. According to Cowen Group, arguably the most bullish of all Wall Street investment firms, the global cannabis industry could hit $75 billion in annual revenue by 2030, placing it on par with or ahead of the soda industry. To put things mildly, we just don’t see growth stories like this come along all that often.

The big unknown is no longer whether the cannabis industry will be around 10 years from now. Instead, it’s which pot stocks should be seriously given investment consideration. Topping that list just might be the world’s largest marijuana stock by market cap and the first pot company to ever uplist to the New York Stock Exchange, Canopy Growth (NYSE:CGC)…

Sporting a more than $16 billion market cap, it’s pretty evident that Canopy Growth has a fan base that believes there are plenty of reasons to buy. Then again, this is a company with 22 million shares held short as of Jan. 30, 2019. It’s apparent that valid arguments can be made for Canopy Growth from both sides of the aisle, as you’ll see below.

Three reasons buying Canopy Growth is a smart investment

The most logical reason to buy into Canopy Growth is because of the massive equity investment of $4 billion it received from Modelo and Corona beer producer Constellation Brands(NYSE:STZ). The investment was announced in mid-August, closed in November, and represented the third such time that Constellation had made a direct or indirect investment in the company. Upon closing, Constellation had a 37% stake in Canopy, with the warrants it received giving it the option at a future date to up its stake to as much as 56%. Not only does this cash infusion give Canopy more than enough capital to execute on its business strategy, which includes acquisitions, but it makes the company a serious buyout target by Constellation Brands a few years down the road.

Secondly, Canopy Growth is going to be a top-notch producer of cannabis, and as a result, it has landed itself an impressive number of supply deals. As of the fiscal third quarter, the company had more than 4.3 million square feet of licensed production space but has aspirations of having all 5.6 million square feet of growing capacity licensed by Health Canada this year. When fully operational, this should work out to…

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