CGC Stock Forecast 2019: Why the Pot Industry Star Still Has Room to Grow
CGC Stock Forecast for 2019
My top pick in the industry remains Canopy Growth Corp (NYSE:CGC). The CGC stock forecast remains very strong, despite a recent hiccup in the market, with the potential for the company to see a 100% gain in 2019.
With the company’s market cap at $10.6 billion, this is the largest and most dominant player in the industry at the moment, and for good reason.
CGC stock looks to benefit from the company’s many strong deals in 2018 that have set it up for continued success moving forward.
You have production capacity expansion continuing apace as Canopy signs supply agreements across Canada, with major contracts inked with many Canadian provinces.
Then you have the company’s globally-minded approach. The hallmark of a marijuana company looking to see gains in the future is a willingness to spread its reach to previously untapped markets.
The reason, then, that the CGC stock forecast is so strong is the company’s ambitious plans to spread its reach as far and wide as it can.
This year, the company saw jolts in its Germany sales and has continued to solidify its presence in the second-most exciting marijuana market around, behind the U.S. (more on that below).
Canopy also benefited from expansion into South America, with acquisitions on the continent that have again given it a strong position to take advantage of hundreds of millions of potential consumers that are sure to be available in the continent as time goes on.
Remember that Uruguay, not Canada, was the first country to fully legalize pot. There’s a precedent already established on the continent of marijuana legislation, so it’s not too far-fetched to believe that marijuana may spread across South America faster than other regional markets.
Another huge boon to the CGC stock forecast is the impressive vision. CEO Bruce Linton sees the company as “a tech company that grows cannabis,” explaining that Canopy’s model is one that eschews paper and instead relies on digital databases to help track and follow its sales numbers.
He also went on to say that he envisions Canopy as a “Google of pot,” by which he means he wants Canopy to be dominant in the sector and provide a wealth of trustworthy, differentiated products that will excite consumers. (Source: “Canopy Growth Wants to Be the Google of Cannabis, CEO Says,” Bloomberg, December 10, 2018.)
As an example, Linton mentioned the use of cannabis to replace other sleep aids that are generally deemed to be hazardous or at least require a lot of precaution before use. This would not be the case for marijuana.
And marijuana has long been a threat to the pain pill and sleeping pill markets, as it offers a safer and less addictive alternative to products that are traditionally known for just how dangerous they can be when abused.
So what makes me so fundamentally impressed by the CGC stock forecast for 2019—and what makes me believe that we could see a 100% growth—is the company’s willingness to innovate and maintain a strong forward-looking vision.
Another great example of that vision is the company’s investment arm, Canopy Rivers Inc (OTCMKTS:CNPOF, CVE:RIV), which first went public a couple of months ago.
The company is heavily focused on the U.S. pot market, poised to strike when legalization does come through. It hopes to be among the first investors in U.S. pot should federal regulations change. (Source: “Canopy VC arm ready to pounce if U.S. legalizes marijuana,” Bloomberg, November 19, 2018.)
CGC Stock Financials
The most recent financial report, however, did leave much to be desired, and explains why the company has been experiencing losses of late—alongside the larger market downturn.
Canopy experienced a loss of CA$330.6 million. An increase in spending would obviously come hand-in-hand with Canada’s legalization, but that still doesn’t help assuage investors who see those numbers and get spooked.
Revenue still managed to jump to CA$23.3 million from CA$17.6 million a year ago. Looking at the previous quarter, however, it fell from CA$25.9. million. (Source: “Canopy Growth Corporation Reports Second Quarter Fiscal 2019 Financial Results,” Canopy Growth Corporation, November 14, 2018.)
The company said “hiccups” in shipping to Germany and complications as a result of Canada’s then-approaching legalization were responsible for the decrease in quarterly revenues. (Source: “Canopy Growth reports Q2 loss on ramped up spending ahead of pot legalization,” CTV News, November 14, 2018.)
Still, the company saw a number of other metrics increase, like number of registered patients.
While overall a disappointing quarter, the company is still very much in the growth part of its life cycle, which explains the spending.
CGC Stock Analysis for 2018
Canopy Growth was, from when I first began writing my daily marijuana column, among my favorite stocks on the market.
Year-to-date, we’ve seen a 33% increase in value. That’s a very strong gain, which is even more impressive when considered relative to other competitors, like Aurora Cannabis Inc (NYSE:ACB) and Aphria Inc (NYSE:APHA), both of which experienced heavy losses in the volatile year that was 2018.
Chart courtesy of StockCharts.com
The company’s many international acquisitions certainly helped the CGC stock forecast for 2019, but nothing helped spur growth in Canopy Growth Corp like the massive capital injection by way of Constellation Brands, Inc. (NYSE:STZ).
The alcohol maker sent marijuana stocks across the board soaring with its $4.0-billion investment in August, and at one point had Canopy up by about 100% year-to-date.
The market correction set in afterwards, but, considering that the marijuana industry started the year on a very high note (again after a similar investment by Constellation in late 2017), this is a very impressive showing from CGC stock in 2018.
Why CGC Stock Could Reach $60 in 2019
Here’s the thing about CGC stock: there’s a decent chance that it will double its value in 2019. But there’s also a decent chance that it will see 20% gains instead.
What is very unlikely to happen, however, is that we see substantial losses in CGC stock in 2019.
You see, another capital injection or market expansion in the U.S. or Germany could send CGC stock soaring to well over $60.00. But if that big market run doesn’t take place, I still imagine that CGC stock will perform admirably.
What this means is that you have a very safe pick—I’d argue the safest—in an industry full of volatility and unpredictability.
With that in mind, someone could invest in Canopy Growth Corp and not wake up in the middle of the night drenched in sweat, worrying over their investment.
In fact, for investors asking if they should consider CGC stock as a long-term investment, the answer is a resounding “yes.” That’s because of the high growth potential for years to come thanks to its global expansion and strong roots in Canada.
Analyst Take
There’s a ton of upside in the CGC stock forecast for 2019.
The company has the appropriate deals in place to see continued growth for years to come from the Canadian marijuana market, while it still has a lot of room to grow in terms of product diversity and market exploration.
CGC stock, it seems, is just getting started.
