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Is Canopy Growth Corp. Really Worth $1 Billion?

Canopy Growth Corp. (TSX:CGC) broke the $1 billion market cap mark, as Canadian investors poured into the stock over the past few months. If you were fortunate enough to buy the stock when it was placed on the TSX this summer, then you’d be enjoying a very nice 236% return. Recently, the stock has had some downside, and traders who were late to the party would have taken a big hit.

Is Canopy really worth $1 billion, or is the stock headed for a major correction to its stock price?

Is the momentum slowing?

Canopy has had an amazing amount of momentum lately, but this momentum may start to slow as bad news makes its way into the media. Up until now, it’s mostly been very positive news for the company as well as marijuana stocks in general. Keep in mind that this stock is not a long-term holding; it’s a stock that will have a ton of volatility for the next year and will most likely soar or crash depending on what kind of news is released.

Canopy announced that it will have a top-notch breeding facility, where the company expects it will be the market leader in marijuana genetics and new-strain creation. The company also stated it was launching a DNA-certified strain called Lemon Skunk, which may be the first of many strains with the Canopy gold stamp of approval.

There’s no doubt that this is a gigantic move, and the stock may be worth even more than $1 billion in a few years from now, especially considering that its American peers will be restricted from international distribution thanks to policies proposed by Donald Trump and the Republican government. This loss to American marijuana producers is Canada’s gain–and Canopy in particular.

Canopy reported a whopping 1,169 kilograms of product sold in its last quarter, which was a 267% increase compared to Q2 2016. Canopy is really firing on all cylinders, and once the Liberal government legalizes marijuana, we may see drugstores act as distribution, and this will see Canopy skyrocket into the stratosphere.

Terrific growth prospects, but too many unknowns

It’s safe to say that Canopy’s market cap will either increase or decrease by a large amount over the next year. If the good news keeps coming in, then there’s no doubt that Canopy could be worth billions of dollars, but this is just considering future growth and assuming Canopy will be one of the industry leaders in the marijuana space.

There are too many assumptions and far too many variables right now to even think that Canopy is worth more than $1 billion. Right now, Canopy is not worth $1 billion, but if it can be everything that traders expect it to be, then the company could be worth this much in a few years down the road.

If you’re going to invest in Canopy right now, then be very cautious. The stock is as volatile as a penny stock, and you could end up losing a lot if things don’t pan out for Canopy.

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Fool contributor Joey Frenette has no position in any stocks mentioned.

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