This Marijuana Stock Stands Up to the Competition

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The long anticipated day of Canada’s legalization of recreational marijuana, now set for July 1st, is almost here. Even without a legal recreational market, Canada’s medical marijuana market had an estimated worth of $250 million last year. However, with the additional recreational cannabis sales, the market is expected to increase exponentially; authoritative estimates have put the Canadian cannabis market somewhere between an annual $5 billion and $10 billion.

Marijuana stock Canopy Growth intends to become the first cannabis production company listed on the New York Stock Exchange. 

Naturally, Canadian marijuana stocks have been in a frenzy of expansions and acquisitions, in hopes of claiming as much of the market share as possible. Among these companies, Canopy Growth Corporation (TSX:WEED), the largest marijuana stock by market cap and revenue, has risen to the occasion by applying for a listing of its shares on the New York Stock Exchange. The marijuana stock currently trades on the Toronto Stock Exchange but soon expects to become the first producer in the industry to list on the NYSE, starting no later than the end of the month.

Canopy Growth claims Constellation Brands, a giant of the alcoholic beverage industry, among its investors, with a 9.9% stake. The timing of closing the deal with Constellation Brands coincided with Canopy’s near filing for a listing on the Nasdaq, from which Canopy CEO decided to withdraw in order to focus on finalizing with the liquor company. In the end, CEO Bruce Linton said the NYSE was a more credible choice than the Nasdaq for Canopy to list.

“Ultimately one of them is on Wall Street and has a bit more history and cache, and the neighbors on it are pretty substantive companies,” Linton disclosed in a phone interview while in the U.S. to meet with potential investors.

While marijuana maintains its federal schedule as a wholly illegal substance in the U.S., and Canopy currently has no U.S. based operations, Linton does expect to draw more institutional investors from the U.S. with the company’s NYSE listing. Hence, the purpose of his trip south of the border to meet with potential investors.

Linton added “I think the investment community has to drop the pot jokes and talk about the investment grade opportunity of cannabis stock.”

Should the NYSE approve Canopy’s application, it will become the second cannabis company in Canada to list on a U.S. exchange. Cronos Group Inc. (CRON:U.S.), the other marijuana stock, began trading in February on the Nasdaq.

“Listing on the NYSE should significantly widen shareholder attention to Canopy,” Vahan Ajamian, a Beacon Securities analyst commented on Monday.

Canopy Growth is not only the kingpin of Canada’s marijuana stocks, but it has tripled in value over the past year; this growth is projected to increase significantly following the start of legal recreational sales.

According to Forbes, the overall market for cannabis is growing at a rapid rate, with an expected rise in the two primary revenue drivers: number of grams sold and the average rate per gram. In addition to the metrics of these revenue drivers, Canopy has other factors that will likely contribute to its growing valuation.

Canopy Growth offers customers an online platform that hasn’t yet been matched by other cannabis stocks.

One of those other factors is Canopy Growth’s launch of their CraftGrow line in April 2017. The launch happened through Tweed Main Street, Canopy’s online platform, where customers can access “high quality cannabis grown by a diverse set of producers.” The website began as a smaller platform, intended to allow sales of the company’s products from subsidiaries in one site, but has since grown into something far larger. Through this platform, customers currently have access to not only Canopy’s trademark brands, but between 8 and 10 sub-brands and 50 different product SKUs. Even though the platform mainly features Canopy’s own brands, it should draw crowds of customers as the only platform of its kind allowing access to a variety of products.

Marijuana stock Canopy Growth currently has six licensed cultivation sites. 

A second anticipated revenue driver involves Canopy’s lesser known acquisition, rTrees Producers Limited, operating as Tweed Grasslands. The acquisition was finalized in April of last year, as well, two months later received its license for cultivation, and commenced production in July as Canopy’s sixth licensed site. The purpose of this production facility was to meet increasing demand for medical cannabis.

Marijuana stock Canopy Growth continues to expand its presence in international markets.

Canopy’s international introduction in medical marijuana markets is also a factor driving revenue. When Germany legalized cannabis for medical use in January 2017, Canopy Growth was quick to respond with pursuit of entry into the market. The governments of other countries are coming around as well, with Brazil, Chile, Australia, Jamaica, Mexico, Israel and South Africa now supportive and encouraging of cannabis research for the purpose of medical treatment. Canopy Growth continues to expand its international opportunities with entrance into the Brazilian and Australian MMJ markets, supply agreements with Spain and Australia, a joint enterprise in Denmark, and a strategic Jamaican partnership, in addition to its presence in the rapidly expanding German MMJ market.

The marijuana stock secured a strategic supply agreement with a Canadian province.

Finally, Canopy’s supply agreement with Canada’s Prince Edward Island province is a potential revenue driver. At the beginning of 2018, Canopy Growth and PEI came to an agreement for the company to supply the province’s online and retail stores with high-quality marijuana for two years, possibly three. Per the agreement, Canopy will supply at least 1,000 kilograms of cannabis in the first year.

Bearing these factors in mind, as well as the growth among usual metrics (i.e., grams sold and price per gram), Forbes projects Canopy Growth’s fiscal year revenues for 2018 to grow to CA$79 million.

(For the latest marijuana stock news, read Marijuana Stock Company Ready to Make What Could Be a Highly Profitable Acquisition)

 

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