Canopy Growth Corp. (TSX:CGC) is the hottest stock on the TSX lately; the stock either crashes or soars on a given day. If you can stomach the volatility, then Canopy may be an interesting trade if you’re willing to make the gamble. The stock is way too volatile and speculative to be considered an investment. Foolish investors know the difference between a speculative trade and a long-term investment; they will never confuse the two.
Canopy acquires German distributor and importer
Canopy is making even larger waves with the announcement that it is acquiring German marijuana distributor, manufacturer, and importer MedCann. Germany is a huge market, and this acquisition could mean that Canopy is ready to become an major international player in the marijuana market.
Germany is in the early stages of allowing its citizens to use marijuana for medicinal purposes. Bruce Linton, the CEO of Canopy, stated that the acquisition “positions us for domestic medicinal production inside Germany.” This could be one of many acquisitions to come that will position Canopy as a leading international supplier of marijuana.
It’s too early to tell whether or not Canopy will be able to be the international leader in this emerging space, but the management team knows what they’re doing and is very well positioned to make Canopy a dominant international producer.
The start of an acquisition spree?
With Donald Trump proposing regulations that restrict American marijuana producers from selling its products across its state borders, this could be the green light for Canopy to go on an international acquisition spree to become to become a world leader in the marijuana space.
Canopy’s American peers will be prevented from growing internationally thanks to these regulations put forth by the Republican government. Their loss is Canopy’s gain, and Canopy looks to be off to an early start of capturing the international market with this well-timed acquisition.
Going forward, we can expect Canopy to make more deals with foreign marijuana distributors like MedCann, and this will make it easier for the company to meet the strict regulations put forth by individual governments.
High risk, high reward
Canopy is looking like a terrific international growth opportunity right now, and this could bring huge upside over the next few years as cannabis becomes regulated or even legalized in many countries around the world. This process could take much longer than traders in Canopy have the patience for, and this could be detrimental to the stock price. Canopy is a stock that is a short-term-trader’s playground, and long-term investors can, and most likely will, get hurt if they jump in and out of the stock.
The volatility is that of a penny stock, and this volatility can be expected for at least the next year. The stock will either skyrocket or crash depending on the sequence of news events that are released in the short term. Be careful when owning this stock if you’re a long-term investor.
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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.