Canopy Growth Corp. Stock: Is There Any Upside Left for 2018?

Is Canopy Growth Corp. (TSX:WEED) stock still a buy after its massive gains in 2017?

| More on:

Investors in Canopy Growth Corp. (TSX:WEED) stock has the new year party already going! Canada’s largest pot producer was up 20% on Dec. 27 at the time of writing, adding to 195% gains for the year, making it one of the best-performing companies listed on the Toronto Stock Exchange.

Those who’ve missed the party this year are wondering if they should try their luck in 2018. Here are the main catalysts that I think will help you decide if you should bet on Canopy stock going forward.

Opening of recreational market

The main growth driver for Canada’s marijuana stocks has been the planned legalization of pot for recreational use in the summer of 2018. Indications are that Canada’s federal government and provinces are getting close to thrashing out all the modalities before the summer deadline.

One of the biggest roadblocks was removed earlier this month when an agreement was reached between the federal government and provinces over the sharing of revenue from pot sales. According to the deal, provinces will get 75% of tax revenue collected, while the rest will go to the federal kitty.

Once combined with a relatively low tax rate on legal cannabis, analysts expect this arrangement will make legal pot pricing competitive and force consumers to shun the black market.

Canopy’s advantage

The opportunity in Canada’s legal recreational marijuana market is huge with experts forecasting sales between $5 billion and $10 billion in a couple of years. But grabbing the market share will be the key for major producers, and that’s where Canopy has the greatest advantage.

Canopy is aiming to expand its facilities, ​representing ​3.2 ​million ​sq. ft. ​of ​indoor ​and ​greenhouse ​production ​capacity. Canopy, through acquisitions and partnership, has positioned itself to ramp up its sales once the market is opened.

It bought Mettrum Health in January 2017 and sold about 10% of its stake to Constellation Brands, the third-largest beer producer in the U.S., which plans to sell cannabis-infused beverages in markets that allow the recreational use of marijuana.

The company ​has also ​established ​partnerships ​with ​leading ​names ​in ​Canada ​and ​abroad, ​with ​interests ​and ​operations ​spanning ​seven ​countries ​and ​four ​continents. It also owns a pharmaceutical distributor in Germany and has entered joint-venture, or partnership, agreements in several countries, including Spain, Australia, Denmark, Brazil, Jamaica, and Chile.

Is Canopy stock a buy in 2018?

There is no doubt that after its two-fold surge this year, Canopy stock will struggle to repeat this performance next year. On these levels, there is a lot of speculative interest that will vanish at the first sign of trouble. But that risk is inherent in any high-growth story without the sales to back it up.

Given the Canopy’s strength and its market position, I think this stock is the safest bet in Canada’s marijuana space. If you want to try your luck next year, then Canopy is the stock to consider.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Haris Anwar has no position in the companies mentioned.

More on Investing

Man data analyze
Tech Stocks

3 Reasons Celestica Stock Is a Screaming Buy Now

These three reasons make Celestica stock a screaming buy for long-term investors.

Read more »

profit rises over time
Dividend Stocks

These 2 Dow Stocks Are Set to Soar in 2025 and Beyond

Two Dow Jones stocks are screaming buys but Canadians must hold them in an RRSP or RRIF to avoid paying…

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

How to Use Your TFSA to Earn Ultimate Passive Income

If you have a TFSA, then you have the key to creating ultimate passive income. All you need is a…

Read more »

Confused person shrugging
Dividend Stocks

Better Buy: Fortis Stock or Hydro One Stock?

Let's do a compare and contrast of these two top utilities stocks right now, shall we?

Read more »

A close up color image of a small green plant sprouting out of a pile of Canadian dollar coins "loonies."
Dividend Stocks

Boost Your Passive Income: 2 Canadian High-Yielders at a Bargain

Nutrien (TSX:NTR) stock and another play that appear like fantastic dividend bargains in mid-November.

Read more »

Super sized rock trucks take a load of platinum rich rock into the crusher.
Metals and Mining Stocks

Invest $7,000 in This Dividend Stock for $672 in Passive Income

High yield can be an essential requirement when you need to start even a modestly sized passive income with a…

Read more »

telehealth stocks
Tech Stocks

Well Health Stock: Buy, Sell, or Hold?

Another record-breaking quarter and strong demand sets the stage for continued momentum for Well Health stock.

Read more »

3 colorful arrows racing straight up on a black background.
Dividend Stocks

TSX Stocks Soaring Higher With No Signs of Slowing

Three TSX stocks continue to beat the market and could soar higher in an improving investment landscape.

Read more »