Canopy Growth (TSX:WEED): What Can Reverse the Slide in the Stock?

Canopy Growth Corp (TSX:WEED)(NYSE:CGC) is well positioned to grow its revenue, making it a good long-term investment.

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It looks quite tough for investors to get excited about marijuana stocks these days after a powerful rally this year. The reflection of this thinking can be seen in the stock prices of top marijuana producers that are plunging — and not showing any sign of bottoming out.

Canopy Growth (TSX:WEED)(NYSE:CGC), the world’s largest cannabis producer, has lost more than half of its value since April in this broad-based sell-off. Trading $30.32 at the time of writing, it’s down from this year’s high of $72.68.

But if you want to get some future guidance on the company’s growth direction, the recent insight provided by the Canopy’s largest shareholder, Constellation Brands, is important to pay attention to. 

Higher-value products

Constellation’s latest financial results are the first since the Modelo beer maker said in June that it was not pleased with the pot producer’s earnings in which it reported a wider-than-expected fourth-quarter net loss. In August, Canopy reported a $1.28 billion loss, or $3.70 per share, for the three months ended June 30.

Constellation chief executive Bill Newlands told analysts Thursday that Constellation was working with Canopy to the launch of next-generation cannabis products in Canada in the coming months, “when Canopy will unveil their portfolio of value-added higher-margin products,” including drinks, edibles, and vapes.

Newlands said that Canopy’s team in the U.S. has been “actively developing” its range of CBD products and related market plans and has been working to secure the production resources needed to have these items in the U.S. market by the end of the cannabis company’s fiscal year on March 31, 2020.

“New CBD product offerings include skin care and cosmetics, therapeutic creams, beverages, edibles, oils, and softgels,” he said on a conference call. “Overall, we’re pleased with the progress of the Canopy team and what they have done in the last few months.”

Despite the criticism by investors who want to see a quick path to profitability, Canopy is still busy acquiring new assets and consolidating its market position. Canopy this week completed an all-cash deal for a majority stake in BioSteel Sports Nutrition

“This acquisition allows us to enter the sports nutrition space with a strong and growing brand as we continue towards a regulated market of food and beverage products that contain cannabis,” Canopy CEO Mark Zekulin said in a statement Wednesday.

Bottom line

I don’t see a quick recovery in Canopy’s share price as long as the environment remains hostile for growth stocks that have yet to show profitability. Marijuana stocks have been the victim of this trend. But if you’re a long-term investor, in my view, the current weakness offers a good opportunity to take a position in Canopy Growth, which has a solid portfolio to enable the company to grow faster than its peers.

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 Haris Anwar has no position in the stocks mentioned in this article.

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