In April, CGC stock has gained 16.5%, compared to the S&P 500’s return of 4.1%. Moreover, for this year, Canopy Growth (TSX:WEED) (NYSE:CGC) stock has gained 82.7% since the beginning of the year against the S&P 500 return of 18.3% over the period.
Acquisition of Acreage Holdings
The gain of CGC stock in April is attributed to the recent announcement that Canopy Growth was buying rights to acquire Acreage Holdings Inc. (OTCQX:ACRGF), a cannabis producer based in the US. The deal to acquire Acreage Holdings involves paying an upfront fee of $300 million for the right to purchase the company for $3.4 billion in the event marijuana gets legalized by the federal government of the US.
In a press release, Canopy Growth CEO Bruce Linton stated that Canopy was acquiring Acreage to secure its strategic entrance into the US once the federal government legalizes marijuana.
Although recreational and medical marijuana is legal in most US states, the company cannot enter those markets. This is because the New York Exchange where CGC stock is listed in the US does not allow its listed companies to engage in any activity that is illegal under federal laws.
The High Valuation
For investors looking for the most promising cannabis stocks, then CGC stock could be a consideration. The valuation of CGC stock is high, which means investors can have a long-term outlook because most of its growth has been priced in already.
Canopy Growth is also ahead of other growers because of a huge cash pile resulting from its partnership with Constellation Brands (NYSE:STZ). The company received $4 billion last fall from Constellation Brands after the maker of Modelo and Corona beers increased its stake in the company to 38%. Currently, the two companies are working on producing a CBD-infused drink that will be legal in Canada sometime this year.
CGC stock was upgraded to buy by Martin Landry, a GMP analyst.
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