Canopy Stock Forecast: The Safest Bet to Play in the Pot Market Ahead of Legalization

marijuana stock
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Canopy Stock Forecast 2018

January was, by all accounts, a rough month for the marijuana industry. Companies both big and small suffered as stock prices near universally plummeted in a pretty massive correction. Many of the biggest weed companies fell by over 20% in the month.

But when it comes to weed stock predictions—as with any hot, emerging market—volatility is to be expected. After all, companies that make gains of hundreds of percentage points in a few months are also vulnerable to losing some of those speedy gains.

Canopy Growth Corp (OTCMKTS:TWMJF, TSE:WEED), the industry leader, took a big hit last month. What does that mean for the Canopy stock forecast for 2018?

Frankly, not a whole a lot. Obviously, if you first started investing in January, you’re likely none too pleased with the company’s performance of late. That lost money is no small matter. But in the long run, we’ve seen marijuana corrections before, when the industry expands at an uncomfortable rate for the market to bear.

And it has certainly been growing at a breakneck pace. From early October 2017 to early January 2018, Canopy stock soared by over 200%. Even with the correction, the gains made since October mean that investors more than doubled their money over that time.

While these types of swings are what the marijuana market is all about in its current phase of development, my preference for the long-term viability of stock picks means that we’d like to see a little less of these wild swings.

Yes, investors will miss the hundreds of percentage points gained in a few short months (and there’s still more of that to come, I’d bet), but they won’t miss waking up with cold sweats in the middle of the night, wondering if their stocks gave all the gains back the next week.

That brings us to Canopy stock. The company is the industry leader and the dominant market presence. You want to see stability from it, with strong, consistent growth. Right now, however, we’re still very much in the speculative phase, so prices will fluctuate.

Having said that, I believe that Canopy stock will recover in the next few months, with WEED stock more likely than not hitting $30.00 per share sometime during spring.

I think that the marijuana gold rush is by no means dead, and as we approach Canadian legalization, we’re going to see more people running to get a piece of the pie before it’s too late.

Speaking of Canada’s marijuana legalization…

How Canada Marijuana Legalization Could Boost the Stock

The marijuana stock story of the year is naturally going to be Canadian marijuana legalization.

When the laws eventually roll through Canada’s parliament—effectively legalizing the drug across the entire country—it will mark the first time a developed western nation has had federally regulated and approved weed on its streets.

With a huge consumer base already baked in (puns are impossible to avoid when writing about marijuana stocks), there’s little doubt that the green rush is going to come hard and fast, with competent companies that are able to meet the demand likely to experience big boons to their stock prices.

I believe that Canopy Growth is precisely the type of company that is ready for legalization, due to its strong fundamentals, infrastructure, size, reputation, and business savvy.

Still the largest marijuana company in the world by market cap, the WEED stock forecast is likely to be in for a treat when Canada passes its marijuana legislation. As such, 2018 may be a very bright year indeed for the weed maker, January notwithstanding.

Canopy vs Aurora: The Better Investment

While I’m big on Canopy stock, there are obviously competitors. Take Aurora Cannabis Inc (OTCMKTS:ACBFF, TSE:ACB), for instance. Both Aurora and Canopy are strong companies, both are growing more powerful in the still-young marijuana market, and both are susceptible to a major potential political development in 2018: a U.S. crackdown on marijuana.

Just last week, I wrote a rather sprawling analysis on ACBFF stock, examining some of the moves that the company was making that I agreed with and others that gave me (and investors, notably) pause.

While I believe that both companies have a lot of potential and that both will be strong in 2018, the better investment is frankly hard to judge as they operate in many of the same spaces.

APHQF stock chart

Chart courtesy of StockCharts.com

Both are trying to expand into European markets. Both are acquiring smaller pot producers in an effort to increase output. Both are at the top of the food chain when it comes to market caps.

But they’re also both vulnerable to American rollbacks on marijuana.

Canopy and Aurora have made several investments in the U.S. marijuana market. Obviously, weed has yet to be fully legalized in the U.S. outside of a few states. And even then, state law can be overruled by federal law, which still lists marijuana as a highly dangerous illicit drug.

But as both companies work to stake their claims in markets beyond Canada, making moves within the U.S. border is difficult due to the complications of the laws, not to mention risky.

While President Donald Trump has not said explicitly that marijuana use is going to be severely impacted by his administration, his attorney general, Jeff Sessions, is a well-known drug prohibitionist who has long catered to more hardline drug enforcement policies.

Should Sessions gain a significant amount of autonomy in 2018 and receive Trump’s approval, then the industry could be in for a hit. After all, companies are hungrily eyeing the American market and trying to find their ways in, so a return to more draconian drug laws will damage weed stocks.

I don’t think that a mass U.S. crackdown on marijuana is imminent—there’s just way too much else going on—but it is plausible, which adds a thin layer of uncertainty to investing in some of the bigger companies, as they are the ones primarily concerned with U.S. drug laws due to their plans for the U.S.

Having said all that, however, let’s finish off with what I like about Canopy stock.

Should You Consider a Canopy Investment?

There are a lot of reasons to be happy about Canopy’s most recent moves on the market.

The Canopy-Australia partnership with Auscann Group Holdings Ltd (OTCMKTS:ACNNF) allows Canopy Growth to be the exclusive supplier of medical marijuana to AusCann. (Source: “Canopy Growth to Supply Australia Through AusCann Group Holdings,New Cannabis Ventures, September 13, 2017.)

I think this deal perfectly encapsulates what makes Canopy Growth such a strong company. Large-cap Canadian pot companies are going to be the industry’s standard-bearers for some time as fellow nations are also making their way toward laxer marijuana laws, by and large, just at a slower pace.

Canopy and other large Canadian marijuana stocks have the luxury of established infrastructure and knowledge to take advantage of other budding marijuana markets across the world.

Constellation Brands, Inc. (NYSE:STZ) saw fit to invest in Canopy Growth Corporation as well, further lending legitimacy to the industry (and Canopy, specifically). (Source: “Constellation Brands to Acquire Minority Stake in Canopy Growth Corporation,” Constellation Brands, October 30, 2017.)

Analyst Take

Between deals being made in Australia—including one with the Victorian State Government—and its otherwise solid market position, I believe that the January blues will quickly fade into memory as Canopy stock price forecast climb back to $30.00.

There’s so much momentum right now that I believe 2018 will be a strong year for Canopy and the marijuana industry as a whole, hiccups aside.