Your $1,000 Investment in Canopy Growth Stock Would Have Made You $13k Richer in Just 3 Years

 canopy growth stock forecast
iStock.com/MarianVejcik

Canopy Growth Stock Price History

Some investors don’t believe me when I say that Canopy Growth Corp (OTCMKTS:TWMJF, TSE:WEED) is one of the best investment stories of the last three years. Those who stumble on Canopy Growth’s stock quote, for instance, have no idea it turned people into millionaires. They just see the price and shoot me an email about my TWMJF stock price target for 2018.

I appreciate the correspondence. But maybe it’s time to look back on this stellar investment before giving our Canopy stock forecast.

For example, if you had invested $1,000 three years ago, you would have an extra $13,000 sitting in your trading portfolio today. That’s no misprint. Your account balance would truly have swelled 13-fold in three years.

Still skeptical? I totally understand. Lots of analysts cherry pick numbers to make their stock picks look good. They hunt for peaks and troughs, draw a straight line between them, and claim it proves their forecasting success. It’s nonsense.

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So, here’s a three-year Canopy Growth stock chart, unmodified and unchanged.

Chart courtesy of StockCharts.com

Impressive, right? Canopy Growth puts the best stocks in the world to shame. Below is a quick comparison between TWMJF stock and the so-called “FAANG” stocks: Facebook, Inc. (NASDAQ:FB), Amazon.com, Inc. (NASDAQ:AMZN), Apple Inc. (NASDAQ:AAPL), Netflix, Inc. (NASDAQ:NFLX), and Google, now known as Alphabet Inc (NASDAQ:GOOGL).

Chart courtesy of StockCharts.com

It doesn’t matter whether or not you approve of marijuana legalization. The fact remains that Canopy Growth stock is a growth monster. But will this trend continue? That’s the million-dollar question.

Should You Consider Canopy Stock?

The first thing to consider is your risk profile. Cannabis stocks are extremely volatile assets, meaning that investors should treat them with caution. Don’t do anything reckless. Weigh the risk-reward on our Canopy stock forecast. And make the decision that best suits your personal comfort level.

Beyond that, you should understand how Canopy Growth stock is valued.

Normal companies—take Apple, for instance—design a product and sell it almost immediately. The “iPhone” is built, then you buy it. Apple pockets the profits and stacks up that cash in an Irish bank account.

Canopy stock is different.

It is similar to biotech stocks, in the sense that government approval is a precursor to selling to the public. This regulatory hurdle completely changes revenue, cash flow, profitability…in other words, everything.

It also means that Canopy won’t reach its full potential until after marijuana becomes legal.

Biotech stocks follow the same arc. They have to wait for the U.S. Food & Drug Administration (FDA) to green light their pharmaceuticals, meaning that until their drugs are rubber-stamped, all investors see are the costs for developing that drug and none of the potential profits.

So, you can’t rely on the income statement or profitability metrics when valuing Canopy Growth Corp stock. (Or biotech stocks, for that matter.) You have to look at the market, then evaluate the company’s position in that market.

Obviously, Canada’s upcoming legalization of adult recreational use is driving share prices, but some readers may be unfamiliar with the market forecasts. Here are a few details:

  • Canada is legalizing adult recreational use on July 1, 2018. (Source: “Insights into the recreational marijuana market,” Deloitte, last accessed May 4, 2018.)
  • Deloitte estimates a base retail market of $8.7 billion.
  • Deloitte also says weed-related services could add another $13.9 billion.
  • Up to 40% of Canadians say they might “try” marijuana.
  • Demand could start at 360 tons of marijuana. (Source: “How big is Canada’s marijuana market, really?,” Maclean’s, June 30, 2017.)

Canopy Growth Corp Stock Value

We recently wrote about a GW Pharmaceuticals PLC- ADR (NASDAQ:GWPH) drug that was positively reviewed within the FDA.

It received unanimous recommendation for approval. But did that impact the company’s sales or profits? Not in the slightest. But investors are familiar enough with this valuation pattern that it still sent GWPH stock flying to the moon.

Marijuana stock bulls argue that Canopy stock forecasts deserve the same treatment. And for the last three years, they’ve won that argument. Investing in TWMJF stock in 2015 would’ve been great. Shares prices are up more than 1,300%.

CANOPY STOCK PRICE HISTORY
Symbol Name Starting Price Current Price Total Return
TWMJF Canopy Growth Corporation $1.62 $23.50 +1,351%

But the market is overhyped, say the bears.

Sure, cannabis demand is set to explode. Legalization in Canada might truly raise the demand for marijuana to 360 tons. But Canopy isn’t the only company racing to fulfill that demand.

Aurora Cannabis Inc (OTCMKTS:ACBFF, TSE:ACB), Aphria Inc (OTCMKTS:APHQF, TSE:APH), MedReleaf Corp (OTCMKTS:MEDFF, TSE:LEAF), Hydropothecary Corp (OTCMKTS:HYYDF, CVE:THCX), and Cronos Group (NASDAQ:CRON), just to name a few, are in the race as well.

All these companies have ambitious expansion plans. All of them are building additional output capacity. In fact, some estimates say they’ll collectively produce 475 tons of cannabis in the first year, which is about 32% higher than demand estimates.

This “supply overhang” could devastate marijuana prices in the short term. It would be even worse for marijuana stock values. Shares of Canopy Growth would plummet if quarterly revenue came in below expectations.

So, what’s the verdict? Should you be optimistic about Canopy Growth’s stock outlook?

Analyst Take

It’s pretty easy to find bullish weed stock predictions on the Internet. Then again, it’s easy to find bearish predictions as well. Analysts are so divided over these investments that it can be difficult to figure out whether you should invest in marijuana stocks or not.

I personally think investors should “trade the rumor, sell the news.”

This means that Canopy stock still has some upside left to explore until its first post-legalization earnings. But I wouldn’t trade around that earnings announcement, because the volatility would be sky high.

Instead, I’d wait for the inevitable bear. Sooner or later, the market will drive Canopy Growth stock into the bargain bin, giving us a second chance to score big on TWMJF stock.