The industry leader in pot for the past few years has undoubtedly been Canopy Growth Corp (NYSE:CGC). Canopy Growth stock is nearly double in size compared to its nearest competitor, when looking at market cap.
Canopy Growth was able to carve out this spot largely due to the potential locked within the company, and I believe a lot of that potential will finally be seen in 2020. That’s why I’m very bullish in my CGC stock prediction for 2020, projecting gains of about 50% (with the possibility of much more).
My bullish perspective on Canopy Growth stock isn’t all that complicated.
We have been seeing the Canadian marijuana industry mature day by day, with marijuana edibles having been recently legalized in the country. That will allow marijuana companies to better combat the still-thriving black market, thereby increasing their revenue and the prices of marijuana stocks in 2020.
As the marijuana market in Canada continues to mature, we can expect to see more action taken against the black market by governments and businesses.
Once the black-market activities are down, many of the billions of dollars in revenue being siphoned away by illicit dealers will flow into the legal market and likely spark a second marijuana stock rush.
This upcoming rush will be made all the more powerful by the legal companies having fallen short of expectations so far, which has lowered their share prices.
That’s a perfect storm of potential for pot stocks in 2020, with CGC stock leading the pack.
Another huge win for Canopy Growth stock is the company’s newly acquired license from Health Canada that will allow it to operate a 150,000-square-foot cannabis-infused beverage facility. (Source: “Canopy Growth Receives Health Canada Licence for State-Of-The-Art Beverage Facility,” Cision, November 25, 2019.)
That will permit Canopy Growth Corp to participate in an extremely exciting new subsector of the market.
When Canopy Growth first partnered with the alcohol maker Constellation Brands, Inc. (NYSE:STZ), cannabis-infused beverages were exactly what that deal was leading up to.
Now we have the most powerful marijuana company in the world getting into drinkable cannabis products—with a large alcohol company providing resources and expertise.
That will likely culminate in a huge surge in revenue, which would send CGC stock prices soaring.
The thing is, cannabis-infused beverages don’t have to set the world on fire in terms of sales. They just need to help bolster Canopy Growth Corp while the company continues to pick away at the black market in Canada.
And then, of course, you have the fact that Canopy Growth is one of the best positioned companies to take advantage of U.S. marijuana legalization due to its deal with Acreage Holdings Inc (OTCMKTS:ACRGF, CNSX:ACRG.U).
Canopy Growth acquired the option to purchase Acreage Holdings for $3.4 billion, with a mandate to exercise that right when cannabis production and sale becomes federally legal in the United States. (Source: “Canopy Growth Announces Plan To Acquire Leading U.S. Multi-State Cannabis Operator, Acreage Holdings,” Canopy Growth Corp, April 18, 2019.)
“Our right to acquire Acreage secures our entrance strategy into the United States as soon as a federally-permissible pathway exists,” said Bruce Linton, who was Canopy Growth’s chairperson and co-CEO when the deal was announced in April. (Source: Ibid.)
This deal makes a ton of sense—from the Canopy Growth side. The company now has a huge step up on its competition when it comes to entering the United States.
With its slew of products and connections, as well as its large production capacity, Canopy Growth is very well situated to take advantage of the expanding legal marijuana market.
All that serves to make my CGC stock prediction for 2020 as bullish as it is.
Chart courtesy of StockCharts.com
CGC Stock Quarterly Report
The most recent CGC quarterly report was rather impressive.
Among other things, the report showed that Canopy Growth Corp leads in terms of marijuana market share in Canada. In particular, the company has more than 35% of the market share in Alberta, which is Canada’s most developed provincial recreational pot market. (Source: “Canopy Growth Reports Second Quarter Fiscal 2020 Financial Results,” Cision, November 14, 2019.)
While Ontario remains Canada’s richest province, Alberta has had a far stronger rollout of weed legalization by comparison. This is actually good news for investors. As Ontario matures and reaches its potential, we can expect to see revenues rise.
Canopy Growth’s second-quarter report also showed that consumer demand for cannabis increased compared to the previous quarter. Canopy saw recreational pot company-owned same-store sales growth of 17% and global medical organic sales growth of 23%. (Source: Ibid.)
Gross revenue jumped by six percent to CA$118.3 million (without considering restructuring costs). Canopy ended the quarter with CA$2.7 billion in cash and cash equivalents and marketable securities available for sale.
The overall picture, then, is of Canopy Growth with strong fundamentals, on top of all its potential going into 2020.
The company said that, with what it calls “Cannabis 2.0” products—like edibles and cannabis-infused beverages—legally hitting the marketplace in the near future, it hopes to juice its revenue in the coming quarters and keep its share price rising steadily.
I, for one, believe that Canopy Growth stock is more than up to that task.
My CGC stock prediction for 2020 is that the stock is looking solid, with the company having a number of strong developments in the pipeline that should help spark revenue increases and share-price growth.
Couple Canopy Growth Corp’s strong fundamentals with larger, macro developments—like the eventual U.S. marijuana legalization and diminished Canadian black market—and you have a great time for Canopy Growth stock investors as shares currently trade at a very reasonable price.