Canopy Growth: Growing Trend Should Worry Canopy Growth Stockholders

Canopy Growth
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Canopy Growth Corp (CVE:CGC) stock is down 17.5% as the number of short-sellers’ bets begins to skyrocket.

Short-sellers have begun circling Canopy Growth, which is not a good sign for the long-term value of the stock. (Source: “Short-sellers piling into Canopy Growth and other marijuana stocks,” The Globe and Mail, November 21, 2016.)

And the numbers certainly demonstrated that interest, at least earlier in the week. On November 16, Canopy Growth stock peaked at a value of $16.29, up 173% from a month earlier. But this might have been a case of too much, too fast, as CGC stock has now plummeted to about half the peak value at $8.65 on Tuesday.

With several U.S. states voting to legalize marijuana on November 8 and Canadian Prime Minister Justin Trudeau promising to do the same federally in Canada, it’s understandable why investors have been hot on marijuana stocks, particularly the industry leader, Canopy Growth.

Canopy Growth stock and other marijuana stocks have benefited from the changing social attitude toward the drug earlier this year. A Gallup poll reports that 60% of U.S. adults support the legalization of marijuana. (Source: “Support for Legal Marijuana Use Up to 60% in U.S.,” Gallup, October 19, 2016.)

If the drug were to be regulated, that would certainly open up large swaths of the market to be serviced by Canopy Growth and other marijuana producers, but the issue lies more in the when. While there is public support in the U.S. and a promise from leadership in Canada, Canopy Growth could still have some time yet before the company will be able to take its product to market.

And that hasn’t even addressed some of the issues faced by producers within states where the drug has been legalized.

Gains have been seen across the board for marijuana stocks, but Canopy Growth has seen some of the biggest jumps and falls. It gained 182% over the past 12 months.

Where the stocks will go from here is anybody’s guess, but it’s looking like more and more people are becoming sheepish around marijuana stocks in general, and Canopy Growth stock in particular, concerned that the drug producer might have benefited a little too much from the hype while not yet having the right political and legal climate to sell its product.