Canopy Growth Corp. (TSX:CGC) has delivered fantastic returns since graduating to the TSX last summer. The stock has rallied over 250% over this time, and investors who’d picked up shares have become quite rich. The stock may be hitting bubble territory and could be dangerous as a core holding, but I believe the stock is just getting started.
While the stock is quite volatile at current levels, it may actually have room to soar even higher with the help of Donald Trump.
You don’t know volatility like Canopy
Trading was halted five times on Wednesday, as Canopy stock experienced massive spikes throughout the trading day. Canopy may be one of the most volatile stocks out there; in a single day the stock soared over 25% in the morning, but it was down 15.3% by market close.
Although there are a lot of tailwinds right now, it’s unrealistic for an investor to expect the stock to continue soaring at its current pace. However, the stock keeps proving to investors that it can keep moving higher. Canopy released its earnings report last week, and it was very impressive. Revenue rose a whopping 245% over the same period last year. The stock responded by rallying big time in the days following, and now it may have finally hit a ceiling of resistance.
There’s no question that Canopy has been focusing on branding. It even partnered with celebrity pot smoker Snoop Dogg to unveil a new line of marijuana products. This promotion could cause recreational sales of marijuana to soar, and the true potential of the business may not be fully realized until years after it’s legalized across Canada.
Several American states voted to approve recreational marijuana use, and this news combined with the impressive quarterly results caused Canopy to skyrocket to ridiculous new highs.
The Donald could keep the party going
Donald Trump has been talking of targeting American pot producers and restricting them from selling their products across state borders. This government restriction could hold Canopy’s American competitors back big time, and this opens doors internationally for Canopy without having to compete with its American peers. This regulation that could be brought forth by Trump would give Canopy, as well as other Canadian marijuana stocks, a competitive advantage.
Investing in R&D could give Canopy a competitive edge
It’s no mystery that Justin Trudeau is fighting to legalize marijuana nationally, and with this comes yet another huge growth opportunity for Canopy. The company is also looking to invest big in research and development, and this could bring new strains of cannabis to the market that could combat several medical ailments. If Canopy does create a promising new strain, it will patent it. And, like a pharmaceutical company, it will rake in major profits thanks to these patents.
If Donald Trump prevents U.S. marijuana producers from expanding its business across state lines, then this could prevent all American marijuana companies from growing or filing for patents.
There are many opportunities for Canopy to grow right now, and it seems like the good news keeps coming. Although the stock has risen to bubbly highs, I think there’s still plenty of upside thanks to Donald Trump.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Joey Frenette has no position in any stocks mentioned.