Canopy Growth Q3 2019 Report: Why CGC Stock Could Double in 2019

Canopy Growth Q3 2019 Report: Why CGC Stock Could Double in 2019
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Canopy Growth Q3 2019 Earnings

When it comes to marijuana stocks, the beginning of 2019 has been nearly the exact opposite of last year. Whereas 2018 saw a mass decline in the pot stock market, 2019 has seen marijuana stocks across the board register healthy gains.

One stock that was on fire right out of the gate is Canopy Growth Corp (NYSE:CGC). Already a leader in the legal cannabis industry, CGC stock has surged in 2019, up over 70% year-to-date.

The most recent Canopy Growth financial report has solidified its position as a top pot stock, one that has plenty of room to grow in 2019. In fact, I foresee this stock doubling its value before the end of the year.

To understand why I’ve made such a lofty prediction, let’s take a look through the company’s financial report.

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Canopy Growth Q3 2019 Financial Report

The Canopy Growth Q3 2019 financial report was full of goodies for marijuana bulls.

Revenue ballooned by 282% in the quarter, climbing to CA$83.0 million,l up from CA$21.7 million in the same quarter in the previous year. (Source: “Canopy Growth Corporation Reports Third Quarter Fiscal 2019 Financial Results: Gross Sales of $98M; Net Revenue hits record $83M,” Canopy Growth Corp, February 14, 2019.)

This massive jump in revenue was helped along by a huge increase in sales, which was a result of Canadian recreational marijuana legalization.

The company sold over 20,000 pounds of cannabis in the quarter, a 334%  increase from Q3 2018.

Chart courtesy of StockCharts.com

The company’s inventory doubled and its cash, cash equivalents, and marketable securities increased by over 1,000% from the previous year.

There were only a few things holding the Canopy Growth Q3 2019 report back from being a total and resounding slam dunk.

For instance, cannabis harvested fell five percent compared to the previous year’s third quarter. That’s only a slight dip, but it does worry some investors due to the company’s need for growth as the marijuana industry expands globally.

Overall, however, the Canopy Growth Q3 2019 financial report was a winner on the numbers side.

On the business side, Canopy Growth showed a number of solid developments, like increasing its intellectual property portfolio. That speaks to the company’s ongoing pursuit of innovation and development in the still-maturing industry.

“Our successful first full quarter with recreational sales in Canada reinforces our long held strategy of making meaningful investments early in order to secure market share,” said Bruce Linton, chairperson and CEO.

Linton added:

The Canadian recreational cannabis market will be dominated in the long term by businesses delivering excellent products and consumer experiences. Sales from the first wave of products and retail environments launched in the third quarter demonstrate that we are capturing consumers’ attention.

(Source: Ibid.)

What makes the Canopy Growth Q3 2019 financial report all the sweeter is that these numbers are all bound to grow as Canada sorts out some of the early missteps it made when marijuana became legal.

In Ontario, for example, marijuana consumers are still unable to legally buy cannabis from a physical retail location, and will continue to be unable to do so until April. Other provinces, like Quebec, had to impose reduced store hours in order to compensate for a lack of supply.

This was not so much the fault of the producers; it was a problem up and down the supply chain, largely due to government regulations.

But these early hiccups were expected. Nearly every legal marijuana market before Canada has gone through similar growing pains, only to emerge stronger from the other side.

Not to mention that products like edibles are still making their way through the legislative process.

The takeaway is that Canopy Growth is just getting started with its marijuana sales. I anticipate that we’ll see impressive sales growth for the next several quarters, powering share prices toward that 100% gain I predicted earlier.

CGC Stock Prediction for 2019

There’s more to like about CGC stock beyond the Canopy Growth Q3 2019 financial report. As I said earlier, 2019 has been really good for many pot stocks. For Canopy Growth stock, it has been outstanding.

Canaccord Genuity Group Inc (OTCMKTS:CCORF, TSE:CF) is one of the few banks actively tracking the marijuana industry. The bank recently released a note describing the excitement about the U.S. cannabidiol (CBD) market in the wake of the 2018 Farm Bill. (Source: “Cannabis stocks look set to flourish thanks to Trump’s 2018 Farm Bill,” CNBC, January 30, 2019.)

That bill legalized the cultivation of hemp, a cannabis plant very similar to marijuana, save for one key difference: the absence of the psychoactive compound tetrahydrocannabinol (THC). The main substance that producers are extracting from hemp is CBD.

Canaccord specifically mentioned Canopy Growth as one of the top pot stocks to watch as the U.S. CBD market begins to open up. This is a huge endorsement of Canopy by a major institution.

Furthermore, the company has made clear its plan to enter the U.S. CBD market in force, hoping to capitalize on what is the first legitimate way into the U.S. cannabis market. Being able to profit from the millions of consumers in the U.S. will drive up sales figures.

Another kingmaker in the marijuana industry, Piper Jaffray Companies (NYSE:PJC), also heaped praise on CGC stock, raising the company’s price target. Piper Jaffray wrote that Canopy Growth is “well positioned” in the emerging and growing marijuana market. (Source: “Canopy Growth shares climb premarket as Piper Jaffray raises price target to $60 vs. $40,” MarketWatch, January 25, 2019.)

Piper Jaffray has perhaps one of the loftiest projections for the marijuana market. It predicts that the industry will hit about $15.0–$50.0 billion in the near future while being worth $250.0–$500.0 billion in the long term.

In any case, mainstream institutional analysts are behind Canopy Growth, speaking to the company’s strong foundations and positive long-term outlook. The technical analysis also bears this out.

Furthermore, Canopy Growth has been raising its profile internationally. At the recent World Economic Forum, the Davos elite held their first ever talk about the cannabis industry. (Source: “Global elite set to meet cannabis elite as marijuana industry descends on Davos for first time,” Financial Post, January 22, 2019.)

Considering how many billions of dollars of personal wealth was represented at the conference, it shows that the cannabis industry has officially entered the mainstream. As a result, it will likely be seeing huge injections of capital as it continues to grow.

Canopy Growth had a presence at the forum, with Linton being on hand to schmooze and otherwise represent the legal marijuana industry to some of the world’s most powerful people.

This all culminates in a great start to a year that seems poised to continue in an upward trajectory.

Analyst Take

I believe that Canopy Growth stock will double by 2020. It would be no small feat to achieve a 100% stock price increase in one year, but I believe that the stock has what it takes to get there.

Canopy Growth Corp saw its hard numbers come back strong in the Canopy Growth Q3 2019 financial report.

On top of its solid fundamentals, the company has made itself the darling of the marijuana industry. Banks, analysts, wealthy investors—all of them are following Canopy Growth with interest, intent on keeping up with one of the fastest-growing companies in one of the fastest-growing industries.

With all that in mind, the future is bright for CGC stock.