Once, the Constellation Canopy Growth partnership excited the entire market, not just the cannabis industry. Now, people are questioning whether this was a smart move on the part of Constellation, which owns brands like Corona.
Constellation Canopy Growth Partnership: A Mistake?
On August 15th, Constellation Brands announced a $4 billion investment in Canopy Growth (TSXV:WEED), which is a leading Canadian cannabis company. The news sent the Canopy Growth stock up more than 30% and left Constellation Brands trading at $42.20 at market close. It even sent the Aurora Cannabis stock up around 19%.
Fast forward a month, and analysts are questioning the Constellation Canopy Growth partnership altogether.
On Monday, September 10th, a SunTrust analyst slashed Constellation Brands’ rating and stock price target. Why? Because the Canopy Growth investment will “keep a cloud over the stock,” particularly over “the next few quarters.”
The analyst, William Chappell, downgraded the stock to ‘hold.’ For perspective, Chappel had a ‘buy’ target on it since January 2016. He also cut the price by $40, going from $260 to $220.
Here’s the thing: Chappell said there isn’t a “problem” with the company making investments in cannabis, but there is “little certainty” in the Canopy Growth investment. Plus, Chappell said this could shift investor focus from its beer portfolio.
Some say that all the stock-boosting benefits from the Constellation Canopy Growth partnership have gone to Canopy. Since the Canopy Growth investment was announced, the Constellation stock has lost 4.2%.
Constellation Brands Share Price
Constellation Brands is a stable company that displays consistent results year-over-year, and despite the recent pessimism, the stock is holding its head high. At least, it is at press time.
As of 2:22 EDT, Constellation Brands (NYSE:STZ) is up 0.09%. However, it’s very likely the STZ stock could fall into the red zone before market close.
What do you think about the analyst slashing the Constellation Brands stock price target? Will it have an effect on the cannabis industry? Was the Constellation Canopy Growth partnership a mistake? Let us know in the comments below.
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