Investing $1,000 in Canopy, 4 Years Ago Is Worth This Much Today

2:04 p.m.
October 28, 2019
A.D.M



For years, marijuana stocks were practically unstoppable, and a quick look at a combination of Wall Street and independent analyst forecasts for the industry shows why. With one Wall Street investment firm calling for as much as $200 billion in annual sales in a decade, and the duo of Arcview Market Research and BDS Analytics projecting a near-quadrupling in global sales by 2024 in their State of the Legal Cannabis Markets report, it hasn't been hard for investors to become enamored with pot stocks

But of the dozens upon dozens of cannabis stocks to choose from, the trio of Canopy Growth (NYSE:CGC), rose to the top of the pack. What you might not realize about this trio is that, despite being absolutely throttled over the past seven months, they're delivered in a big way for investors over the past four years.
As you're about to see, if you had invested $1,000 into each of these three marijuana stocks over the trailing four-year period (beginning Oct. 23, 2015), you'd have made a lot of money.

Canopy Growth: $12,794

You'll note that even with Canopy Growth having given up more than 60% of its gains from its peak, shares of the company have risen by close to 1,200% over the trailing four-year period. It's also still the largest pot stock in the world by market cap.
Working in Canopy's favor is the fact that it's the most cash-rich cannabis stock of them all. Following a 600 million Canadian dollars convertible debenture offering in June 2018, and a $4 billion equity investment from Modelo and Corona beer maker Constellation Brands in Nov. 2018, Canopy collected itself quite the war chest. It's been able to aggressively make acquisitions, expand its production capacity, and push into overseas markets, including the U.S. hemp industry.
But there are plenty of challenges that lie ahead for Canopy Growth. For one, the company doesn't have a permanent CEO steering the ship. Visionary co-CEO Bruce Linton was shown the door in early July after the company's quarterly losses ballooned. Meanwhile, current CEO Mark Zekulin, who previously served as co-CEO with Linton, will also be vacating his leading role once a permanent CEO replacement is found. This leaves Canopy's future very much in limbo.
Costs are also a worrisome topic for the company. Linton believed that issuing long-term-vesting stock was the best way to keep employees loyal to the company. Unfortunately, share-based compensation expensing has soared, right alongside general and marketing costs. It's looking as if Canopy could be one of the last pot stocks to generate a recurring profit.
As one added note, Canopy's goodwill has been growing in recent quarters as it adds to its assets via acquisitions. It's uncertain if the company will be able to recoup its CA$1.93 billion in goodwill, which could lead to a future writedown.
For now, long-term investors have done pretty well with Canopy Growth. However, their resolve to continue holding will likely be tested in the coming quarters. Investment into cannabis within the next 2 or 3 years will be important. Before long the cannabis market will sky rocket to another level.
Investing $1,000 in Canopy, 4 Years Ago Is Worth This Much Today Investing $1,000 in Canopy, 4 Years Ago Is Worth This Much Today Reviewed by Anson Moore on October 28, 2019 Rating: 5

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