Canopy Growth (NYSE:CGC) is the first cannabis company to take advantage of a new path to do business in the U.S., but it’s unlikely to be the last. The recent Farm Bill removes hemp from the controlled substances list, providing the first opportunity for large, Canadian marijuana stocks to do business in America. How big of a deal is this? Analyst Shannon Jones is joined by Todd Campbell to discuss Canopy Growth’s plans.
Also, they discuss what Aurora Cannabis (NYSE:ACB) preliminary quarterly results tell investors about Canada’s new recreational market and how Cronos Group’s (NASDAQ:CRON) recent tie-up with tobacco giant Altria (NYSE:MO) puts it in an envy-inspiring position to profit from widespread legalization…
A full transcript follows the video.
This video was recorded on Jan. 16, 2019.
Shannon Jones: Welcome to Industry Focus, the show that dives into a different sector of the stock market every day. I’m your host, Shannon Jones. Today is Wednesday, January the 16th. We’re talking Healthcare. I’m joined in the studio via Skype by healthcare guru Todd Campbell. Todd, how are you?
Todd Campbell: Hi, how are you today? It’s great to be back! It’s going to be a packed, fun show today. We’ll cover some topics that we haven’t talked about in a little bit. I think our listeners are going to love it.
Jones: Yes. Super excited for today’s show. We’re going to be covering some of the bigger news stories surrounding the marijuana industry. Todd, it’s been a couple of months since we’ve gone through the top stories and what’s happening in the industry. There’s been a lot going on over these past couple of months.
Campbell: It’s really fascinating. You might think that, given that share prices of most marijuana companies fell dramatically after the Canadian recreational market opened in mid-October — “buy the rumor, sell the news” proving itself out yet again — people might think, “Well, these stocks have been horrible. Nothing good is happening.” But underneath the surface, it’s business as usual. We’ve got companies that are reporting big deals that could have billion-dollar impacts down the road.
Jones: Absolutely. For investors that may be hurting, those that wanted to be the first movers into this industry, certainly with the marijuana industry, it’s still very a young industry that’s budding — excuse the pun there. It’s growing, so there’s going to be growing pains. But just like you said, Todd, it’s business as usual.
Talking about deals, let’s start off with the more recent news. It was big news coming from the largest marijuana producer by market cap, which is Canopy Growth, ticker CGC. It now appears to have a pathway to the United States. That’s really thanks to some crucial pieces of legislation that came on both the federal and state levels. I took a look this morning — right now, Canopy is sitting on a hefty $14 billion market cap. The shares are priced right around $41 a share. Year to date, shares are up about 54%, vs. the S&P up about 4.3%. Todd, lots of good news happening for Canopy Growth. Is it true? Is Canopy Growth coming to America?
Campbell: [laughs] Yeah, and we’re not talking about the 80s Eddie Murphy movie, for anybody who’s been around the block —
Jones: [laughs] And potentially a reboot coming for Coming to America! Which I’m super excited about! One of my favorite movies. But, I apologize, I digress.
Campbell: The big news here is that Canopy Growth has long said, “Listen, we’re not going to do business in the U.S.” That’s because cannabis is still illegal federally. Listing rules on stock exchanges in Toronto and New York say that if the business is illegal federally, you can’t participate and still be on the exchange. So, they have long stated, “We’re not going to do business in the U.S. until we find a legal pathway so that we don’t run afoul of federal laws.”
They got their path. They got their path in December, Shannon, when the U.S. passed the newest, latest Farm Bill. That Farm Bill included…
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