Canopy (TSX:WEED) Stock Down 37% From its February Peak: Buy Now?

Investors are excited with the coming federal legalization of marijuana in the United States. The share price of the Canopy Growth stock declined 37% from its February 2021 peak but remains the top-of-mind choice in the sector.

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An overhaul of the cannabis legal structure or industry reform in the U.S. is coming soon. It’s the only thing missing to gain entry into the lucrative U.S. markets. If marijuana obtains federal approval, Canadian pot producers will have a breakthrough.

Canopy Growth (TSX:WEED)(NYSE:CGC) is the company that is most  likely to thrive and make hay across the border. However, industry peers such as Aurora CannabisAphria, and Hexo also expect to benefit from America’s sweeping changes.

Momentum is likewise building among weed stocks since February 2021. Canopy Growth shares rose to a high of $66.21 but are down nearly 37% on March 16, 2021. However, market analysts are bullish. They forecast a potential climb to $75 once cannabis gets legalized at the federal level in the U.S.

High on the agenda

Even before the Democrats won the U.S. presidential elections, cannabis reform was high on the Biden-Harris team’s agenda. The pair said they would support moderate drug rescheduling and federal medicinal legalization during the campaign.

The Biden administration will allow states to set their respective laws and marijuana decriminalization for adult use. Meanwhile, industry entrepreneurs and investors expect even more tremendous growth after legalization. There was a surge in cannabis use during the pandemic.

Data from the National Conference of State Legislatures show that 36 states and the District of Columbia have approved the medical use of marijuana. Out of the total, 15 states and D.C. have approved recreational use of pot. The fortunes of Canadian cannabis producers, including Canopy Growth, could change after the brutal sell-off of weed stocks in 2019.

One foot in the door

Investors in the cannabis space are optimistic that federal legalization is imminent. Canopy Growth has one foot in the door already. It could acquire 70% of Acreage Holdings, the leading vertically integrated multi-state operator in the United States. The company has the option to buy the remaining 30% of Acreage.

Canopy plans to purchase more than 10% of TerrAscend, the first North America Operator (NAO) with scale operations in Canada and the United States. It’s a significant player in the medical and legal adult-use market in Canada. Moreover, TerrAscend operates in several U.S. states where cannabis is legal for therapeutic or adult use.

Best positioned

The agreements with Acreage and TerrAscend will help Canopy expand its product offerings throughout America as regulations relax. Another advantage is the support from Constellation Brands. The alcoholic beverage giant owns 38.6% of Canopy Growth.

Its president and CEO, Bill Newlands, said Canopy is best positioned to win in the emerging cannabis space. He believes the long-term opportunity is substantial. Newlands’ expectations are realistic now that Democratic senators list federal cannabis reform as a high priority.

Decisive advantage

Some analysts would go further by saying cannabis may prove to be the shining light in a post-pandemic world’s economic landscape. While the passing of cannabis reform measures in the U.S. could come after 2021, Canopy Growth remains the top-of-mind choice.

The agreements with Acreage and TerrAscend, plus the partnership with Constellation Brands, give it a decisive advantage. Expect Canopy Growth’s inroads into the lucrative U.S. market to be smooth when marijuana federal legalization is here.

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 Christopher Liew has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Constellation Brands. The Motley Fool recommends HEXO. and HEXO.

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