The legal marijuana industry appears untouchable when comparing the speed and momentum at which it’s been growing against other industries. Analysts from ArcView – a global leader among marijuana research firms – estimate the cannabis industry in North America will continue to grow at an average annual rate of 26% through 2021. The implications of this point to roughly $22 billion in legal cannabis sales across Canada, the United States and Mexico over the next three years.
When it comes to the marijuana stocks market, investors can have vastly different experiences with their cash depending on which country a company’s operations are based.
The United States is a prime example where, despite growing consumer and state-level support for marijuana legalization, cannabis is still considered a wholly illegal substance by the federal government. The cannabis industry, under the Trump administration, has already experienced a tightening of regulation – such as the rescinding of the Cole Memo and public statements of opposition made by Attorney General Jeff Sessions.
Therefore, those seeking weed stocks to invest in have been wise to focus their marijuana stocks investments further North, on the Canadian weed market. Canada’s journey with legalization began in 2001, when medical marijuana was legalized nationally. Fast forward seventeen years and Canada is on the verge of legalizing recreational use cannabis to adults. The bill, which is not expected to be lacking votes of approval with progressives in the Parliament majority, will come to vote on June 7, with the revised timeline of an additional 8 to 12 weeks following approval for it to be implemented in all provinces. Once Canada gives the green light to recreational sales, the prediction is a surplus of billions in annual revenue for the Canadian market.
Taking the much-anticipated legalization into consideration, along with strong patient growth in the medical marijuana sector, it’s not surprising that Canadian marijuana stocks have been racing to expand production capacity.
Some of Canada’s growers are finding new opportunities to expand through foreign exports and distribution of their dried marijuana crops in legal MMJ countries.
But, of all Canadian marijuana stocks, perhaps none are as poised to benefit as the largest of them all – by market cap – Canopy Growth Corp (NASDAQOTH:TWMJF). The company’s fiscal third-quarter report, which came out several weeks ago, showed a consistency with meeting, and in some cases exceeding, company and investor expectations. The good news began with a 123% year-over-year sales increase and an adjusted profit; but, what follows are the real selling points for Canopy Growth as a winning weed stocks company to invest in.
1. Canopy Growth leads the marijuana stocks market in patient reach.
First off, Canopy Growth’s expansive reach of patients in the medical market is bound to attract investors. Though growth in the medical sector will likely come to a halt upon the legalization of recreational weed, the ongoing sales generated by registered patients will continue to play a vital role in easing the cash expenditure of capacity expansion.
At the end of the recent quarter, Canopy Growth counted 69,000 active registered patients – a figure that more than doubled from the same quarter last year. This success speaks loud and clear of the company’s acquisitions, distribution reach and the popularity of its production brand, Tweed.
2. The magnitude of capacity expansion for the marijuana stocks company spans millions of square feet.
Impressive to retail and Wall Street investors alike is the magnitude of Canopy Growth’s capacity expansion. To date, the company claims 665,000 square feet of operational growing spread between seven facilities. It is also in the process of adding 3.7 million square feet to its greenhouses in British Columbia.
Canopy Growth’s third quarter harvest of 8,000 kg of weed may not have been an impressive figure, but, it represented a 51% gain over the prior-year period. Once recreational cannabis sales are given the go-ahead, that figure will likely soar exponentially. Some have estimated Canopy Growth could claim up to 15% of Canada’s recreational market.
3. As product mix improves, so does the average selling price of marijuana stocks related products.
Some investors see the 13% year-over-year improvement in Canopy Growth’s average selling price – rising to $6.65 (CA$8.30) per gram – as a more impressive figure than its 123% sales growth. Rising demand could be partially responsible for a rising selling price, but, there’s another factor for Canopy Growth: its product mix.
Specifically, softgel capsules and cannabis oils are partially responsible for the increase. By the end of the fiscal third quarter, Canopy Growth had sold 2,132 liters (equivalent to 262 kg) of their oils and capsules – an 84% increase from the same period last year. Thanks to the significantly higher price point for oils and softgel capsules, compared to dried forms of cannabis, this shift represents nothing but good news for marijuana stocks investors.
4. Expansive partnerships and channels of distribution indicates good news for marijuana stocks Canopy Growth.
An increase in strategic partnerships and improvement of distribution channels has also been a selling point for Canopy Growth. One of its notable strategic partnerships is the $191 million deal struck with Constellation Brands (NYSE:STZ), a global giant among liquor companies and the maker of Corona. This cross-industry collaboration should not only inspire development of new products, but, continue to improve upon Canopy Growth’s channels of distribution.
Furthermore, Canopy Growth’s supply agreements with Canadian provinces Newfoundland, New Brunswick and Labrador represent the first among Canadian growers, each signed in separate memorandums of understanding. In recent weeks, the company’s capacity expanded once again with the announcement of a considerable supply agreement with Sunniva (NASDAQOTH:SNNVF), based in British Columbia.
5. The marijuana stocks company has more than $320 million on hand in cash and cash equivalents.
It’s worth stating that Canopy Growth is far from lacking cash on its books. At the end of the quarter, the company recorded roughly $190 million on hand between cash and cash equivalents; but, post-quarter this number has actually increased to more than $320 million, thanks in large part to bought-deal offerings. This robust supply of cash on hand should allow the company to finish its projects for capacity expansion in British Columbia without difficulty.
(For more investor information on Canopy Growth Corp, read This Is THE Marijuana Stock to Invest In.)