Forget Everything You’ve Read About Cannabis: Canopy Growth Corp. Is Your Long-Term Investment

Aurora Cannabis Inc. (TSXV:ACB), Aphria Inc. (TSX:APH), and Canopy Growth Corp. (TSX:WEED) will be drastically impacted by future legislation. Don’t be invested in the wrong cannabis company.

| More on:

Marijuana companies across the Great White North have been enjoying steady top-line growth over the past few years. Special legislation was created, thanks to recognition of the plant’s medical benefits, to allow these organizations to circumvent the national ban on the substance. Today, more than 100,000 Canadians have obtained prescriptions to buy cannabis from licensed growers—a three-fold growth over the past year.

That said, the prize for the industry is not hermetically sealed. As part of Justin Trudeau’s outlined marijuana agenda, the plant will be nationally legalized come June 1, 2018. This has massive implications for all savvy investors with a hat in the cannabis ring.

Lifestyle becomes the name of the game

The overall sector’s growth is fueled by the retail consumer. The medical benefits are not to be ignored, but the lifestyle associated with consuming the product is the industry’s driving force. More than any other Canadian cannabis provider, Canopy Growth Corp. (TSX:WEED) has positioned itself to dominate retail.

Those who argue that the medically focused players can easily shift to retail are perhaps currently enjoying the product itself. The consumer is savvy and protective of their own personal brand. The value from the products’ association with medical benefits will completely change once new legislation passes.

With an open market, the marijuana industry will begin to resemble craft brewing rather than pharmaceuticals. The perception of the product is critical to driving revenue. After all, would you indulge in Johnson & Johnson’s new (and fictional) Jobin Double IPA? Developing a strong connection with the consumer is of the utmost importance and can be quite expensive. Ask any executive at a large beer manufacturer.

Canopy Growth Corp. has begun by spending on sales and marketing; its budget is more than double the combined expense of its two major competitors, Aurora Cannabis Inc. (TSXV:ACB) and Aphria Inc. (TSX:APH). This has already manifested in a larger social media following and tangential revenue from merchandise.

Tweed, it’s principle brand, has invested in cannabis content and periphery services. In addition, its partnership with Snoop Dogg should not be overlooked. His branded line, “Leafs By Snoop,” is a top seller in Colorado, where weed has already been legalized. Further, Snoop’s online media platform, MERRY JANE, boasts more than 100,000 followers. These digital channels are the foundation of a global distribution network, upon legalization.

Canopy Growth Corp.’s management deserves applause for a longer-term mindset in anticipation of a drastic market overhaul. The fundamental risk is a government reversal on national legalization. Although possible, Trudeau’s term is through 2019 and potential successor, Kevin O’Leary, has remained upbeat on the proposal.

For the savvy investor intrigued by the expansive opportunity in the marijuana space, Canopy Growth Corp. is the holding for long-term stock appreciation.

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 Jared Shulman has no position in any stocks mentioned.

More on Investing

A stock price graph showing growth over time
Dividend Stocks

2 Safe TSX Stocks to Add to Your TFSA Amid Rising Volatility

Given their stable underlying businesses and healthy growth prospects, I'm bullish on these two low-volatility TSX stocks.

Read more »

A golden egg in a nest
Dividend Stocks

How to Turn $5 Into $50,000 for Retirement

Can you invest in your retirement goals even in this volatile market? The answer is yes, and an investment amount…

Read more »

Glass piggy bank
Dividend Stocks

Compound Interest: 3 Dividend Stocks That Can Make You Rich

If you're looking to maximize the incredible powers of compound interest while investing for the long haul, here are three…

Read more »

Dice engraved with the words buy and sell

3 TSX Stocks I Will “Never” Sell

The Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is one Canadian stock I will never sell.

Read more »

Clean energy
Energy Stocks

TSX From Windfall to Free Fall: Where is the Value?  

The TSX Composite Index is in a free fall after windfall gains from tech and energy stocks. Where to look…

Read more »

Dividend Stocks

TFSA Wealth: How Top Dividend Stocks Can Turn $10,000 Into $185,000

Here's how owning top TSX dividend stocks can help you build TFSA retirement wealth.

Read more »

Pixelated acronym REIT made from cubes, mosaic pattern
Dividend Stocks

Passive Income Seekers: Buy These 6%+ Dividend Stocks Before It’s Too Late!

These three dividend stocks all offer passive income above 6.5%! But don't plan on these valuable rates lasting long.

Read more »

A worker overlooks an oil refinery plant.
Energy Stocks

3 Ways to Make Money From Suncor Energy (TSX:SU) Stock 

Suncor Energy (TSX:SU)(NYSE:SU) stock attracted investors seeking exposure to the oil price. Here's how to make money from it.

Read more »