Should You Buy Canopy Growth Corp. (TSX:WEED) Before its 1st Earnings Report in the Post-Legalization Era?

Why Canopy Growth Corp (TSX:WEED)(NYSE:CGC) might be a bargain before it reports on Wednesday.

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Get ready for more volatility, as cannabis companies begin releasing their first round of quarterly results in the post-legalization era this week. First on tap was Aurora Cannabis, which revealed a jaw-dropping 2,800% in earnings growth alongside a 260% increase in revenues for its fiscal first quarter.

While there’s undoubtedly a high degree of unsystematic risk that’ll send all pot stocks on a wild roller-coaster ride, which will most likely last until year-end, cannabis investors need to remember that this week’s round of results won’t be a meaningful representation for what sales will be like in the legalization era. The legal weed floodgates were opened less than a month ago, so the real “judgement day” for marijuana stocks will be in the next round of earnings results that’ll hit in early 2019.

That doesn’t mean management teams won’t provide commentary on what they’ve seen thus far in the legalization era, however. I think investors will care more about the forward-looking commentary and guidance than the actual numbers themselves, which will still be representative of the pre-legalization era and won’t account for the massive demand boom that everybody is expecting.

Why Wednesday could be rocket fuel for marijuana stocks

Canopy Growth (TSX:WEED)(NYSE:CGC) reports its earnings on Wednesday, and after it does, you can be sure that CEO Bruce Linton, a man who’s been incredibly open with the media, will be open to discussing his thoughts on how the first few weeks of legalization have gone.

Linton was there to make the first-ever legalized recreational sale the moment the clock struck midnight on October 17 in St. John’s, Newfoundland. He’s the face of the nascent marijuana industry, and you can be sure that all ears are going to be listening as Linton steps up to the podium to answer the questions that cannabis investors are dying to know.

I don’t know about you, but I think Linton is going to be as transparent as he can be, revealing bits and pieces of information that could drive cannabis stocks into the stratosphere. Canopy could also shed more light on what its relationship with Constellation Brands and where the company sees opportunity in the first year of nationwide legalization.

Foolish takeaway

I think this week is going to produce Tilray levels of volatility in all cannabis stocks. Analysts are going to be digging for info on how the first few weeks of legal sales went, and if anybody bites, I think pot stocks could soar.

I’d pay close attention to Canopy’s report on Wednesday, as it could be the biggest market mover considering it’s the pot player with the deepest pockets and arguably has the most insightful CEO. If you’re looking to get into weed stocks, I’d get a small position in Canopy before its earnings release on Wednesday, because I have a feeling it could be a catapult for the stock.

Stay hungry. Stay Foolish.

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 of the stocks mentioned.

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