How Canopy Rivers Stock Could Dominate the Marijuana Investment Sector in 2019

How Canopy Rivers Stock Could Dominate the Marijuana Investment Sector in 2019
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Canopy Rivers Inc Stock Forecast 2019

Without question, one of the hottest areas to invest in right now is cannabis. Recreational marijuana became legal in Canada in October 2018, and the first wave of earnings are coming in, with some companies reporting exceptionally strong results.

Cannabis stocks also got a boost when President Donald Trump signed the Agriculture Improvement Act of 2018 into law, removing hemp from the Controlled Substances Act and opening up the retail door for hemp-derived cannabidiol (CBD) sales anywhere in the United States.

Investors who do not want to actually invest in the marijuana industry directly or those looking to diversify their cannabis holdings may want to consider Canopy Rivers Inc (OTCMKTS:CNPOF, CVE:RIV), the venture capital arm of Canopy Growth Corp (NYSE:CGC), the world’s largest marijuana company.

In the lead-up to the legalization of recreational adult-use marijuana, the Canadian weed industry was hit with a raft of initial public offerings (IPOs) as companies looked to finance their operations. Now that cannabis is legal in Canada, the flood of IPOs has slowed down—not yet to a trickle, but it’s certainly slower.

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Something is taking its place, though. In lieu of IPOs, investors should expect to see the pace of mergers and acquisitions in the marijuana market ramp up in 2019 as the sector begins to mature and larger firms look to expand their footprint, invest in their future, and increase their competitive edge.

Mergers and Acquisitions a Focal Point in 2019

In fact, many analysts believe mergers and acquisitions (M&As) will be a major focal point for the marijuana sector in 2019. Not all of these M&As will be big publicly traded companies snatching up smaller, underperforming peers. Look for larger weed companies to snap up private firms as well.

And that’s exactly what Canopy Rivers does. As the investing arm of Canopy Growth Corp, Canopy Rivers pursues opportunities in not just the Canadian cannabis sector, but the global one as well.

Weed may be legal in Canada, but that country only has a population of around 36 million; that’s less than the population of California. The real opportunity for growth is outside of Canada.

Canopy Rivers works alongside Canopy Growth to identify strategic complementary firms seeking financial and/or operational support as part of an effort to become what it calls the “Google Ventures of cannabis.” (Source: “A $10 billion marijuana producer just spun off its venture arm in the hopes it will become the ‘Google Ventures of cannabis’ (RIV),” Business Insider, September 20, 2018.)

Canopy Growth owns roughly 25% of the equity and just under 90% of the votes as a result of its dual-class structure. The other three-quarters of Canopy Rivers’ investments have come from institutional investors.

Canopy Rivers has only been a publicly traded company since September 2018, but it has already added a huge number of companies to its cannabis portfolio.

“We’re really trying to make this smart money that goes global,” said Bruce Linton, CEO of Canopy Growth Corp and acting CEO of Canopy Rivers. “The scouting has been pretty active.” (Source: “Canopy Venture Gyrates in Trading Debut as Cannabis Shares Churn,” Bloomberg, September 19, 2018.)

Indeed it has; Canopy Rivers has been announcing deals left and right. In 2018, Canopy Rivers made 11 deals, adding everything from licensed pot producers to media companies. Of those, 10 were in Canada and one in Italy. (Source: “Management Discussion And Analysis Of Financial Results,” Canopy Rivers Inc, November 26, 2018.)

Since the end of the second quarter of 2018, ended September 30, Canopy Rivers has added additional firms to its portfolio. In early January, the company completed a CA$4.1-million equity investment in cannabis data set company Headset.

In the middle of the month, Canopy Rivers announced a CA$9.0-million investment in Greenhouse Juice Company. The money will be used to help Greenhouse’s national expansion and efforts to develop healthy beverages infused with CBD.

Most recently, in late January, Canopy Rivers announced a CA$1.5-million investment in Herbert Works Ltd., a cannabis edibles and beverage brand headquartered in Toronto. (Source: “Canopy Rivers News,” Canopy Rivers Inc, last accessed February 1, 2019.)

Canopy Rivers Investments

Canopy Rivers Investment Portfolio

Company About
Agripharm Corp. Licensed producer of cannabis
CanapaR Italy Develops and commercializes hemp in Italy
Civilized Media and lifestyle brand promoting cannabis culture
Greenhouse Juice Company Plant-based food and beverage company
Headset Real-time business intelligence and analytics service for the cannabis industry
Herbert Works Ltd. Focuses on THC-infused edibles and beverages for distribution within Canada
James E. Wagner Cultivation Ltd. First entirely aeroponic producer of cannabis in Canada
LiveWell Foods Canada Inc. Global CBD lifestyle company
PharmHouse Joint venture between Canopy Rivers and the principals and operators of leading North American greenhouse produce companies
Radicle Cannabis Licensed cannabis company
Solo Growth Premiere retail cannabis distributor
Spot Therapeutics Inc. Medical cannabis industry
TerrAscend Corp. Publicly traded licensed cannabis producer
Vert Mirabel JV Large-scale cannabis greenhouse operator located in Quebec

(Source: “Portfolio,” Canopy Rivers Inc, last accessed  February 1, 2019.)

Canopy Rivers Stock Analysis 2018

Canopy Rivers debuted on the Canadian Venture Exchange (CVE) and over-the-counter (OTC) markets  in late September 2018, less than one month before recreational marijuana was legalized in Canada. The company’s share price gyrated on its first day of trading.

The Canopy Rivers stock price opened at $6.94 per share, hitting a high of $7.30 and an intra-day low of $5.85 before closing out the day at $6.01.

Despite announcing new investments and advancements, the company’s share price took a hit throughout the rest of the year. Canopy Rivers had the misfortune of going public just before the markets sold off in October and were subsequently hit even harder in December.

Chart courtesy of StockCharts.com

Things have since turned around for the Toronto-based company. Since bottoming on December 28 at $1.75 per share, the Canopy Rivers share price has advanced 149%, trading at $4.37 per share at the time of writing.

Since the start of 2019, the Canopy Rivers share price has increased by about 90%. This growth has been fueled in large part by solid financial results coming out of the broader cannabis industry and three new investments (Headset, Greenhouse Juice, and Herbert).

Canopy Rivers Financials

52-Week High $7.30
52-Week Low $1.75
Shares Outstanding 167.0 Million
Float 81.2 Million
50-Day Moving Average 2.802
200-Day Moving Average 3.350
Market Cap $757.5 Million
Total Cash CA$105.8 Million
Liabilities CA$18.5 Million
Total Assets CA$385.2 Million
Total Equity CA$366.7 Million

(Source: “Canopy Rivers Statistics,” Yahoo! Finance, last accessed February 1, 2019; “Canopy Rivers Reports Second Quarter Financial Highlights and Provides Corporate Update,” Canopy Rivers Inc, November 26, 2018.)

Why Canopy Rivers Could Reach $11.00 in 2019

Canopy Rivers has not announced stellar returns since going public, but thanks to its investment strategy, it has lots of room to run in 2019 and beyond. That’s because the company’s growth strategy is not just focused on the Canadian market; it is thinking globally.

Looking ahead, CEO Bruce Linton said it best:

With increasingly progressive global sentiment towards cannabis, a rapidly evolving regulatory landscape, and the increased volatility we have observed in the capital markets since legalization, the conditions are there for significant potential gains.

(Source: Ibid.)

Analyst Take

Should you consider Canopy Rivers for the long term? The company has lots of money, a terrific management team, and is actively seeking out investments that will help it pursue its goal of becoming the “Google Ventures of cannabis.” That means looking outside of Canada.

As such, RIV stock has both great short- and long-term growth potential. A price target of $11.00, which is 150% from current levels, may sound lofty but it’s entirely within reach.