Canopy Growth Corp (TSX:WEED) (NYSE:CGC) currently has an “outperform” rating on Marketscreener. With CGC stock already the most expensive share in the cannabis industry, investors may question what they are getting for their money at this stage in the game.
Will CGC stock grow much further? Why pay $40+ per share when many of its peers offer potential for half the price? The questions and arguments are all valid.
But there’s a reason Canopy remains the industry leader by market cap and why it also has an average price target set at $76 CAD.
CGC Stock: Money Talks
As much as we admire the “little guy” or the “underdog,” sometimes you simply can’t argue with a stockpile of cash. It’s this cold hard fact that makes CGC stock so appealing for so many; it has a huge cash stockpile resulting from the $4 billion investment made by Constellation Brands (NYSE:STZ) last year.
Money is not everything, and it is not the only reason to like Canopy Growth, but it is a vital one none-the-less.
For investors, it’s simple; the company doesn’t need to raise cash by issuing additional shares. This is a big consideration because many of its peers are in much need of capital and are diluting shares to get it. Further, it is comforting to know that it has the capital needed to fund operations and expansion efforts. Many other Canadian producers cannot say this— they may promise big, but Canopy has the cash to actually deliver.
This injection of cash has also allowed the company to expand into other areas of cannabis that it otherwise may not have done so. This will only serve CGC stock well because as the industry evolves, diversifying product lines is proving to be a lucrative measure.
Add this to its involvement in the US hemp CBD market with its high-capacity hemp production facility in New York. Further, in the US, the company has a paid for the rights to acquire Acreage Holdings (OTCQX:ACRGF) should US federal law legalize cannabis down-the-line.
And going back to that initial $4 billion investment from Constellation Brands; the purpose is to create a line of cannabis-infused drinks. This arm of the industry is expected to be worth $1.4 billion USD in the US by 2024. In Canada, that figure is expected to be $3 billion CAD by 2022.
It seems that Canopy Growth is going to remain a key figure in nearly every cannabis market across the globe. And bearing in mind that some believe the global cannabis market will top $100 billion within a decade, CGC stock could indeed be only at the beginning of its journey.
What do you think?
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