Canopy Growth Corp. (TSX:WEED) Stock Could Hit Triple Digits This Year

Canopy Growth Corp. (TSX:WEED)(NYSE:CGC) has managed to meet high expectations so far and the stock is well on its way to a triple-digit valuation.

| More on:
Arrowings ascending on a chalkboard

Image source: Getty Images.

Canopy Growth (TSX:WEED)(NYSE:CGC) stock threatened its all-time high in late January before retreating in early February. The stock was still up 67% in 2019 as of close on February 14. Its high valuation was one of the reasons I’d warned investors about jumping into cannabis stocks at this juncture.

The cannabis sector has enjoyed success to kick off 2019 and has been a big factor in propelling the TSX to its best start to a year in decades. Canopy Growth’s stock pop in late January was influenced by a rave report from Canadian Imperial Bank of Commerce. “We believe that Canopy Growth represents the industry’s best chance at a global titan,” the report stated.

On the day of recreational legalization, I’d explained why Canopy Growth was the strongest and most dependable producer for the young industry. Canopy Growth had achieved this through top flight management and sound spending. It’s fitting that a Canopy Growth-owned retailer also sold the first cannabis product when the clock struck midnight on October 17, 2018.

Canopy Growth released its fiscal 2019 third-quarter results after markets closed on February 14. Revenues surged 256% year-over-year to $83 million on the back of 10,102 kilograms in cannabis or its oil equivalent sales. Canopy reported net income of $74.8 million or $0.22 per share after a $330 million loss in the prior quarter. However, the company had reiterated that this loss was largely due to spiking operating expenses in preparation for legalization.

Early data showed that recreational sales were slow out of the gate. This should come as no surprise given the myriad issues covered over the course of the rollout. These included supply shortages, logistical problems, and delayed opening of retail stores that continues to this day. Ontario has been especially slow on the draw, and as of today there are still no licensed brick-and-mortar retails active in the nation’s largest province.

The recreational market accounted for over 70% of Canopy’s cannabis sales, which is a promising result with other producers still heavily reliant on the medical market. Like its peers, Canopy is looking to expand internationally in order to fuel growth going forward. The company has begun to tiptoe into the U.S. market after the passage of legislation that removed hemp-derived cannabidiol from the Controlled Substances Act.

Back in November 2018, Canopy revealed that it would spend more than $115 million over the next two years to expand production in the European Union. Cannabis legalization is moving quickly in the European Union in comparison to the slow-moving battle underway south of the border. On February 13, the European Parliament voted on a resolution that would help advance medical cannabis legalization for its member states.

So how does Canopy’s value look right now? What are the chances it breaches the $100 mark in 2019? As of close on February 14, the stock had an RSI of 57, as shares have fallen out of overbought territory. The cannabis sector has been historically volatile, but Canopy Growth is setting itself apart by expanding its global reach. With results to back up the hype, Canopy Growth is a great bet to reach the triple-digit milestone this year.

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 Ambrose O'Callaghan has no position in any of the stocks mentioned.

More on Bank Stocks

retirees and finances
Bank Stocks

Why You Can’t Rely on the Common Sources of Retirement Income  

Future Canadian retirees can’t rely solely on the common sources of retirement income. However, there are ways to convert savings…

Read more »

edit Sale sign, value, discount
Bank Stocks

Buy Bargain Stocks and Make Tonnes of Money in This Market Downturn

Now is a good time to review your buy list to shop for bargain but quality TSX stocks over the…

Read more »

IMAGE OF A NOTEBOOK WITH TFSA WRITTEN ON IT
Bank Stocks

TFSA Investors: The Easiest Way to Turn $5,000 Into $50K

Stop making life so complicated. Buy this dividend stock and see your $5,000 turn into $50,000 in your TFSA.

Read more »

Money growing in soil , Business success concept.
Dividend Stocks

3 Top TSX Stocks to Generate a Stable Passive Income

In an uncertain market environment, here are three low volatility dividend stocks that will help you generate a stable passive…

Read more »

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Dividend Stocks

Beginners: 2 Heavyweight Stocks to Buy and Outrun Inflation   

New and old investors alike can outrun inflation and achieve long-term financial goals by choosing heavyweight stocks as the anchors…

Read more »

Bank sign on traditional europe building facade
Bank Stocks

Why BMO Stock is the Best of the Big Six Banks

BMO stock (TSX:BMO)(NYSE:BMO) has a strong 200-year history of share and dividend growth, and right now it's absurdly cheap.

Read more »

hand using ATM
Bank Stocks

Want Enduring Value-for-Money? Pick 1 of 2 Big Bank Stocks

Two Canadian Big Bank stocks are not only trusted brands, but also offer enduring value-for-money to stock investors.

Read more »

Arrow descending on a graph
Bank Stocks

Why Laurentian Bank (TSX:LB) Stock Fell to 2-Year Lows Last Week

Should you buy LB stock after its massive correction?

Read more »