Canopy Growth South America Deal Another Big Win for CGC Stock

Canopy Growth South America Deal
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Canopy Growth South America Deal

When looking at the marijuana market in 2018, it’s hard to say that Canopy Growth Corp (NYSE:CGC) has been anything but a winner. And the wins for CGC stock are only continuing to pile up as the company announced that it is expanding its reach into South America with a new deal.

The Canopy Growth South America deal sees the largest marijuana company by market cap further expand its global reach with the creation of a new medical marijuana subsidiary, Canopy LATAM Corp.

The deal, valued at about $150.0 million, marks one of the biggest plays by the company in 2018.

“This isn’t a strategy about more growing that we’ll try to send back to Canada or something like that,” said Mark Zekulin, president and co-CEO of Canopy Growth. “This is about building a Latin American market.” (Source: “Canopy Growth unveils new Latin America plan, buys Colombian medical marijuana company,” Financial Post, July 5, 2018.)

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Through the creation of Canopy LATAM, Canopy Growth Corp acquired Spectrum Cannabis Colombia S.A.S.

Canopy Growth’s press release said the following:

Colombia has a proud history of agricultural production and global leadership, from coffee to cacao to roses to orchids, and thanks to progressive cannabis legislation, it is strategically positioned to serve as Canopy Growth’s production, processing, and export hub for Latin America with its operations central to the growth strategy for Canopy LATAM.

The subsidiary will be responsible for helping Canopy Growth expand into a number of new South American markets, including Brazil. Canopy LATAM will primarily focus on medical cannabis research, but its mandate could expand as time goes on.

Overall, I love this deal and think it will be good for Canopy Growth stock.

I’ve never strayed from my belief that the future of the marijuana market is global. In order to reach the true potential of the cannabis industry, companies need to constantly think in an international context, rather than focus too narrowly on Canada or other current markets.

Canopy Growth Corp, in particular, has been strong in this regard, expanding into Germany this year and now adding South America to its portfolio.

The move speaks to a long-term vision, which is why I’ve stressed that CGC stock continues to be one of the better long-term picks.

Although the stock market reacted to the deal with a three-percent spike in the Canopy Growth stock price, it fell about half-a-percent on Friday. But those are short-term gives and takes.

The long view for CGC stock is as bright as it’s ever been.

Analyst Take

Canopy Growth Corp has scored another win with its South America deal.

The company is positioning itself to not only take advantage of the currently legal marijuana markets like Canada and Germany, but also be ready for the massive potential of new, currently closed markets—such as the vast majority of South America.

It’s a long-term game that I suspect will pay off, with big gains down the road.