|Bid||0.00 x 0|
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|Day's Range||8.11 - 8.56|
|52 Week Range||7.05 - 30.00|
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If you have attended past Cannabis Capital Conferences, you know that Benzinga is recognized for bringing in the most reputable, cutting-edge companies and speakers in the industry. From an extemporaneous keynote from Acreage Holdings Inc (OTC: ACRGF) CEO Kevin Murphy to a fireside chat with “King of Instagram” Dan Bilzerian, Benzinga events are nothing short of exciting. While Benzinga's events team gears up for its biggest, most unforgettable conference yet — we are happy to announce speakers of the highest caliber.
Market research and data analytics firm Prohibition Partners has released its first North American Cannabis Report. In the 134-page paper, the firm analyzes the current state of the cannabis industry in Canada and the United States to draw key insights into the industry’s future in the region. The firm is estimating that by 2024, the continent's cannabis market will be worth $47.3 Billion.
Canopy Growth Corp (NYSE:CGC) stock has been under major pressure in recent months. Attitudes and expectations for cannabis stocks in general have come crashing back down to earth.Source: Shutterstock However, here's the good news for long-term investors: very little about Canopy's long-term growth outlook has changed since CGC stock hit a new all-time high back in April. In other words, Canopy investors can now get the same shares of Canopy Growth stock for roughly a 50% discount. CGC Stock Hit by Risk-Off TradeCanopy reported a 60% quarterly decline in net revenue and a 17% earnings miss in the fiscal first quarter. The controversial ouster of Canopy's CEO and founder Bruce Linton in July added to the uncertainty in the name.InvestorPlace - Stock Market News, Stock Advice & Trading TipsBut Seaport Global analyst Brett Hundley upgraded CGC stock to "buy" on Monday. Hundley says there's no doubt Canopy's recent earnings report has reset growth and profitability expectations lower in the near term. But Hundley says the so-called risk-off trade has done the most damage to Canopy Growth stock. * 7 Stocks to Buy Down 10% in the Past Week "However, we would argue that cannabis beta needs to improve going forward, particularly for CGC," Hundley says.Ironically, given the risk the ongoing trade war with China creates, Hundley said North American cannabis may end up being a relative safe haven for investors. Near-term growth expectations may have gotten out of hand.But the ultimate projected size of the mature market and the long-term opportunity for Canopy Growth stock have not changed. The pendulum of investor sentiment swung too bullish earlier in the year. Now, it seems to have overcompensated by swinging too far back into bearish territory. U.S. Market Is KeyAs I wrote back in June, I believe the 2020 U.S. election season will be bullish for CGC stock. The Strengthening the Tenth Amendment Through Entrusting States Act of 2019 (STATES Act) aims to remove the federal government from cannabis regulation. Instead, it would make cannabis law a state-by-state issue. The bipartisan bill is co-authored by Democratic presidential candidate Senator Elizabeth Warren.According to PredictIt, Warren has enjoyed a surge of support in the past couple of months and is now the favorite to win the nomination. With the majority of Americans favoring marijuana legalization, President Trump may not want to be on the losing side of the legalization push. He could even rain on Warren's potential STATES Act victory parade by swooping in with his own legalization plan.If cannabis is legalized federally or even if cannabis banking restrictions are eased, it would be a huge victory for CGC stock. Canopy has already committed $3.4 billion to a conditional buyout of U.S. retailer Acreage Holdings (OTCMKTS:ACRGF). Acreage would give Canopy a major first-mover advantage in the massive U.S. market.Hundley says progress in Washington could also open up the Wall Street flood gates."Within the next two years, we think that the trillions of dollars under management in the U.S. will not only have access to cannabis as an investment, but may very well seek the industry out within what could be a volatile macro environment," Hundley says. The Pendulum Will Swing BackCGC has been punished during the risk-off trade. It may take something simple to swing sentiment back in the other direction. A U.S. trade deal with China might do the trick. Another interest rate cut may rekindle the risk-on trade. Even a strong third-quarter earnings season could ease investors' worries.Regardless of when the pendulum swings back, nothing about Canopy's long-term outlook has changed. Any investors who were buying CGC stock earlier this year when it was trading near $50 should remember why they bought it. Has anything seriously changed about that thesis in the past four months? Or has the share price simply gone down?The way I see it, the biggest thing that changed about Canopy is investor sentiment. If you want to invest in cannabis, I see Canopy Growth stock as one of the top plays. If you were buying at $52, now you can buy it at nearly 50% off.The only recommendation I would give is to not put all your cannabis eggs in one basket. Don't just bet the house on Canopy Growth stock. Buy shares of at least four or five of the top Canadian producers. That way, you take a diversified, long-term approach to what will continue to be a high-risk, high-volatility and highly speculative cannabis market.As of this writing, Wayne Duggan did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Stocks to Buy Down 10% in the Past Week * 15 Retail Survivors to Buy for the Long Run * 7 Stocks That Wall Street Thinks Could Rise 50% Or More The post Time to Buy Canopy Growth Stock at Half Price appeared first on InvestorPlace.
It's been a rough summer for marijuana stocks.Investors have lost faith in the sector amid sluggish sales trends, a lack of legislative progress in the US, and competitive pressures which resulted in tight operating margins and made sustainable profitability look like a pipe dream to date.In particular, you might have heard that the adult-use recreational cannabis market isn't living up to all the hype. Well, it's true. There have been plenty of problems, including delays in retail stores opening in key provinces. Just ask Acreage Holdings (ACRGF).The New York-based cannabis company recently reported disappointing revenue for the second-quarter, which came as a result of unexpected delays, mostly regulatory related, in opening certain retail dispensaries and cultivation facilities in several states, including Massachusetts, Ohio, and Florida. And let’s just say it wasn’t exactly great for Acreage stock, which saw its price tumbling nearly 40% this month.In reaction, Seaport analyst Brett Hundley slashes his price target on Acreage stock from $29 to $15, while keeping his rating at 'buy.' (To watch Hundley's track record, click here)Hundley commented, "We are lowering forward sales and EBITDA expectations for Acreage. As detailed on its August 14th earnings call, the company is making design changes to grow facilities while also making some updates to its processing and retail asset base, in order to incorporate R&D and IP from Canopy Growth (CGC). As a result, this is expected to delay footprint and sales development during 2H:19 and 2020."The analyst continued, "We are thus dropping sales and EBITDA expectations for 2019 and 2020. Notably, our 2020 sales estimate drops to $249.5MM from previous expectations of $419.4MM, and we now project an EBITDA loss of $6.6MM compared with previous expectations for profitability of $120.1MM. We now value the shares off a normalized EBITDA expectation of $68MM. We use a 30.0x multiple to achieve a forward price target expectation of $15, down from previous expectations of $29. We believe that our updated view of normalized EBITDA is more appropriate, relative to previous earnings expectations, given incremental investment that will likely balance against Canopy-related retrofits and benefits."All in all, despite cries of sales delay, the rest of Wall Street largely buys into what this cannabis player has to offer, as TipRanks analytics reveal Acreage as a Buy. (See Acreage's price targets and analyst ratings on TipRanks)
You don't have to look far to see evidence that publicly traded marijuana companies are incredibly volatile. And that assessment is the same for the top players like Canopy Growth (NYSE:CGC). Just in this month alone, Canopy Growth stock has dropped nearly 23%. And since the end of April, shares have shed slightly more than half its market value.Source: Shutterstock Without any hesitation, it's a sickening decline. Just to make matters worse, stakeholders no longer have the buffer that CGC stock was up on a year-to-date basis. At least at the time of writing, that's no longer true. Since January's opening price, the weed company is now looking at a more than 5% loss.As Noel Gallagher formerly of Oasis fame might ask, where did it all go wrong for CGC stock? According to The Motley Fool's Sean Williams, one of the reasons is the company's goodwill.InvestorPlace - Stock Market News, Stock Advice & Trading TipsIn a non-financial context, goodwill actually sounds like a good thing. Certainly, we can use more of it, from in our daily interactions all the way up to in the highest political offices. But from an investor's point of view, goodwill doesn't always live up to its linguistic implications.According to an Associated Press report on the subject, goodwill is the premium that companies place on a bought-out organization's actual assets, such as property, plants and equipment. In other words, goodwill represents vague concepts, such as reputation or corporate culture.This premium is fine during a bull market. But to Williams' point, under iffy circumstances, excessive goodwill may lead to a write-down of its assets. And for a pot investment like Canopy Growth stock, a write-down is the last thing it needs. Why Goodwill Isn't So Bad for CGC StockWilliams makes a compelling argument why you should avoid Canopy Growth stock. Although I'm still bullish on weed, I understand where he's coming from. And especially if you're a conservative investor, I would second his assessment. * 10 Marijuana Stocks That Could See 100% Gains, If Not More Moreover, the Associated Press prepared a great argument for why investors should fear blue-chip S&P 500 companies with excessive premiums for intangibles. Back in the summer of 2016, the news agency wrote that goodwill represented $2.5 trillion of the index's balance sheet. For context, that's roughly 12% of U.S. gross domestic product.Thus, we arrive at a logical argument. If excessive goodwill is bad for storied power players, it must be downright terrible for CGC stock. If we're strictly looking at the financials, then of course, you shouldn't expose yourself to Canopy Growth stock.But let's also remind ourselves that legal marijuana isn't exactly logical. More often than not, companies like CGC are narrative-driven affairs fueled by emotions.That's a far different take from S&P 500 organizations. Specifically, the reason why excessive premiums on intangibles are undesirable for blue chips is that their markets are limited. For example, a tech firm can only sell so many computer chips. If such companies take a hit on goodwill, then it may severely impact pre-tax earnings. Unsure of how they will recoup the losses, observing investors may head for the exits.But with Canopy Growth stock, we don't know what the potential limits are. For right now, the actual limits are whatever the Canadian market can support, which admittedly is not much.But what if we have the long-shot event where the U.S. legalizes marijuana at the federal level? I'd say for CGC that at that point, goodwill isn't a liability, it's a bonus. Canopy Growth Stock Is All About the ReachAt the end of the day, here's why Canopy Growth stock and its ilk like Aurora Cannabis (NYSE:ACB), Cronos Group (NASDAQ:CRON) and Tilray (NASDAQ:TLRY) have stunk up the markets. They're all reaching for the potential that international markets may provide.For example, Canopy has secured the right to buy Acreage Holdings (OTCMKTS:ACRGF) on a contingency. And that contingency is that the U.S. fully legalizes weed.Will it happen? I think it will, but I don't have a crystal ball. Clearly, most Canadian cannabis companies think so as well, which is why they're positioning themselves for that possibility. When they do this, their acquisitiveness naturally lifts goodwill.If political events don't go according to plan, probably all weed stocks will collapse. But if legalization does pan out -- and there's compelling evidence that it will -- CGC goes to the moon. That's the charm and the pitfall of marijuana.As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Marijuana Stocks That Could See 100% Gains, If Not More * 11 Stocks Under $10 to Buy Now * 6 China Stocks to Buy on the Dip The post Canopy Growth Stock Is Short on Fundamentals, But High on Potential appeared first on InvestorPlace.
Canopy Growth (NYSE:CGC) stock has taken a pounding. Shares are down nearly 25% in the past month, from $35.40 per share to $26.57 per share. The investor exodus from marijuana stocks has been brutal.Source: Shutterstock With excess supply outgunning demand, it's no wonder the bull case for pot stocks is tough to justify. But can investors expect a rebound in Canopy Growth stock? Let's take a closer look at the future of CGC shares. Recent Performance of CGC StockCGC released earnings on Aug. 14. For the quarter ending June 30, net revenue was C$90.5 million, down from C$94.1 million in the prior quarter. Overestimating demand for CBD oils and capsules, Canopy lost out while its peers such as Aurora Cannabis (NYSE:ACB) continued to grow revenue. As a result, CGC saw operating losses of C$123.1 million for the quarter.InvestorPlace - Stock Market News, Stock Advice & Trading TipsDespite oversupply in the market, CGC and the other Canadian cannabis names continue to ramp up production. Canopy harvested about 41,000 kg during the quarter. But sales were only 10,549 kg or kg equivalents. Like Aurora Cannabis, Canopy has gotten ahead of itself in its fast drive to scale operations.But is short-term thinking not the way to go with cannabis stocks? As InvestorPlace contributor Luke Lango wrote on Aug. 19, "there is still visibility for Canopy to one day be a $50 to 100 billion company." Investors buying in now may see tremendous gains over a long time frame. * 10 Marijuana Stocks That Could See 100% Gains, If Not More What about investors with a shorter time horizon? Is upside priced in, or can investors get a discount? Let's take a look at the valuation of Canopy Growth stock. Valuation: Canopy Growth Stock Still FrothyCanopy Growth stock currently trades at a Enterprise Value/Sales (EV/Sales) ratio of 32.2. This is a discount to the current EV/Sales valuation of Aurora Cannabis. ACB trades at an EV/Sales ratio of 48.2 In terms of other peers in the "cannabisphere," Cronos Group (NASDAQ:CRON) continues to trade at a high valuation (EV/Sales of 150.7). Tilray (NASDAQ:TLRY) trades at a discount to CGC, with an EV/Sales ratio of 31.4.With the recent beat-down of Canopy Growth stock, shares are now a bargain compared to Aurora Cannabis. But, as I wrote earlier this month, Aurora Cannabis seems to have a better growth playbook. By focusing on the medical marijuana space, Aurora is the safer cannabis stock play. But an overlooked risk factor in both cannabis stocks is dilution. The use of share issuance and warrants to finance unprofitable operations minimizes upside for investors. CGC Stock Dilution Risks ContinueThe company's partnership with Constellation Brands (NYSE:STZ) was initially seen as a boost for CGC stock. But as the partnership progresses, it is clear the deal is terrible for shareholders. Constellation's $5 billion dollar investment included the issuance of warrants. These warrants came with certain covenants to protect Constellation from dilution. CGC's proposed buyout of Acreage Holdings (OTCMKTS:ACRGF) triggered a renegotiation of warrants. Due to this revision, CGC was forced to reprice the Tranche B warrants, resulting in a C$1.2 billion non-cash charge.As I wrote on July 29, dilution continues to be a problem for Canopy Growth stock. This dilution risks goes beyond the Constellation partnership. $600 million in convertible debt comes due in 2023. The conversion price is set at $48.18 a share. If CGC stock continues to languish under this strike price, the company will likely need to raise more capital once the notes mature.Of course, Canopy Growth could be profitable by 2023, and would have an easier time refinancing the debt. But investors should take the dilution risk seriously. With much of Canopy's potential priced into shares, dilutive capital raises could cap the stock's upside potential. Bottom Line: The Canopy Sell-Off Isn't OverCanopy stock is down more than 50% from its 52-week high. But shares could go lower. With Canadian market growth nonexistent, Canopy needs U.S. legalization fast in order to move the needle. With federal legalization still years off, CGC will likely continue to burn cash as it scales up operations. The partnership with Constellation Brands provides plenty of capital to keep the lights on. But the terms of the partnership give Constellation an easy way to takeover the company at a discount.So what's the call on CGC stock? Investors should continue to wait on the sidelines until the situation improves. If Canopy Growth stock falls another 50% (or more), there could be a buying opportunity. I do not deny that we are the early stages of the marijuana legalization story. But investors need to wait until hype has dissipated to consider stocks such as CGC.As of this writing, Thomas Niel did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Marijuana Stocks That Could See 100% Gains, If Not More * 11 Stocks Under $10 to Buy Now * 6 China Stocks to Buy on the Dip The post Down 25% in a Month, CGC Stock Could Fall Further appeared first on InvestorPlace.
GreenAcreage Real Estate Corp. reported Wednesday the finalization of a private placement offering of 7.06 million common shares for aggregate gross proceeds of around $141 million. GreenAcreage is an independently managed REIT that caters to the cannabis industry. The company offers sale-leaseback and build-to-suit transactions to the legal cannabis industry and is run by CEO Katie Barthmaier and President David Carroll.
Despite mostly equal marijuana usage rates along racial lines, the boards at the top marijuana companies are still shockingly white.
Canopy Growth (NYSE:CGC) failed to meet lowered earnings estimates but its problems have yet to hit its biggest owner. Constellation Brands (NYSE:STZ) bought 38% of the Canada-based marijuana company last year. It has warrants for CGC stock that would give it majority control.Source: Shutterstock But while Canopy shares are down by 25% from the $34.20 level they held the day before earnings were announced, Constellation shares have barely budged. They're down just $1 or about 0.5% over the last two trading sessions.Canopy looked on the bright side of life when it reported August 14. Its sales of dried cannabis rose 94% year over year was the headline. But on his conference call CEO Mark Zekulin confirmed he's leaving Canopy once a replacement is found. That should happen in the next few months.InvestorPlace - Stock Market News, Stock Advice & Trading Tips Constellation Doubles DownZekulin and his predecessor, Bruce Linton, invested heavily ahead of marijuana legalization, which has been moving slowly. They have also filed 56 patent applications, bought brands that can't be advertised, and sought international growth that doesn't exist.It was this optimism, and investment, that led Constellation to buy its first stake then double-down to its present 38% holding. It also bought those warrants that will, once exercised, give it majority control. Constellation's confidence helped fuel Canopy's rise.But the value of those warrants has been hit by the fall of Canopy shares. Constellation has gotten a delay in the exercise date, to up to eight years. This comes as Canopy has a deal buy Acreage Holdings (OTCMKTS:ACRGF) once the U.S. legalizes marijuana.Constellation, in other words, is tripling down on legal pot. Meanwhile, former CEO Linton, unceremoniously booted out last month as Canopy's co-CEO and board chair, told BNN Bloomberg he was a buyer of CGC stock after the shares fell on Aug. 15. * 10 Stocks Under $5 to Buy for Fall Until legalization, Constellation is sitting on warrants it can't exercise, an investment it can't get value from, and growth it can't access. Despite this, Constellation shares are up 21%, more than the general market in 2019. It's helped by continuing strong sales of Mexican beer brands like Corona and Modelo, and liquor brands like Svedka. Constellation is also selling 30 low-cost wine brands to E.J. Gallo for $1.7 billion, a little more than its original $3 billion asking price.The result is a company that's leveraged toward high-end brands of beer, wine and spirits, anticipating a windfall when its marijuana train comes in. Almost two-thirds of the analysts following Constellation rate it a buy. Risk? What Risk?Constellation stock is helped by first-quarter earnings that beat estimates. It earned $2.21 per share, when only $2.07 was expected.Even better numbers are anticipated for the current quarter, to be reported Sept. 27. Constellation is expected to deliver $2.63 per share of earnings on revenue of $2.3 billion.Canopy, meanwhile, is expected to see a loss of 26 cents per share when it reports next in November. Canopy's recent quarter sales of $90.5 million are just a blip on Constellation's $2.1 billion revenue figute last quarter."If you look at the speed of growth and the complexity of market regulations, the key is finding the right experience and the right person, and I think there are a number of sector backgrounds that could work well," Zekulin told BNN Bloomberg. * 10 Best Dividend Stocks to Buy for the Rest of 2019 and Beyond Constellation is certain to have a hand in choosing Zekulin's successor. Whomever it is, they are expected to bring stability to the company, as our Will Ashworth has written.So far, however, only superstars at companies like Nike (NYSE:NKE), Williams-Sonoma (NYSE:WSM) and Starbucks (NASDAQ:SBUX) are in the rumor mill. It's like a mid-major college football team that's only considering big-time head coaches for its program. Nick Saban is not walking through that door, and whoever does walk in is bound to be a disappointment. Bottom Line on Canopy Growth StockWhile the problems at Canopy Growth have yet to impact Constellation stock, I think it's only a matter of time before they do.While generations of Americans may be happy not to see their friends hauled off to jail for smoking weed, it takes time to build a scaled, legal marketplace. Canopy underestimated that time. So has Constellation Brands.Dana Blankenhorn is a financial and technology journalist. He is the author of the mystery thriller, The Reluctant Detective Finds Her Family, available at the Amazon Kindle store. Write him at email@example.com or follow him on Twitter at @danablankenhorn. As of this writing he owned no shares in companies mentioned in this article. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Cheap Dividend Stocks to Load Up On * The 10 Biggest Losers from Q2 Earnings * 5 Dependable Dividend Stocks to Buy The post It's Just a Matter of Time Before Canopy Growth's Woes Hit Constellation appeared first on InvestorPlace.
The US cannabis market, in general, has been opening up, especially since Canada legalized marijuana in late 2018. Despite the progress being slow, 11 states already allow the recreational use of marijuana. Medical marijuana is legal in 33 states.
As Canopy Growth (NYSE:CGC) prepares to announce its fiscal first-quarter earnings Aug. 14, analysts are getting nervous. Founder Bruce Linton was told to leave after the last quarter's disappointment. Constellation Brands (NYSE:STZ), which bought 38% of the company last year, has lost patience with CGC stock's losses.Source: Shutterstock But more losses are still expected. The official estimate is 28 Canadian cents-per-share, but the "whisper number" analysts are telling their best customers is as high as 37 cents. Analysts expect revenue of $86 million (in Canadian dollars), down from last quarter's $94 million.Since those losses came out, CGC stock is down 25%, cutting the market cap to $11.26 billion (this time, in U.S. dollars). Constellation stock is down 4% and, while it's still up around 20% for the year, patience is wearing thin.InvestorPlace - Stock Market News, Stock Advice & Trading Tips Too Much Pot?The problem for Canopy, as for other big producers, is that they invested while heavily anticipating legalization. However, legalization efforts are moving slower than some firms bargained for. This can be great news for pot smokers, but very bad news for suppliers, who are now being told to start making money, or else. * 7 Safe Dividend Stocks for Investors to Buy Right Now Smaller players are being weeded out. The job of new Canopy CEO Mark Zekulin, a longtime insider, may be hanging by a thread.Linton and Zekulin invested heavily in production capacity and branding, expecting 500,000 kilos of production this year. This investment may not pay off -- the problem is that while Canada legalized marijuana almost a year ago, provinces can still regulate it. Quebec has been resistant, while legislators in western Canada opposed the move.For CGC stock, the result is that earnings expectations have been falling. Analysts were expecting Canopy to make money in fiscal 2021. Now they're expecting more losses. Where are the Bulls?There remain Canopy bulls. Nicolas Chahine recently called Canopy a buy at current levels. He still considers it speculative but notes that current bottlenecks should be removed over time. Illinois passed a bill legalizing the sale and use of recreational marijuana in June, and regulators expect sales to launch in January. This bill makes Illinois the eleventh U.S. state to legalize recreational use.Smokers aren't the only market. CBD oil is increasingly popular. A friend of mine swears by it for her chronic knee pain. Riding the highs of CBD oil, Canopy is investing in researching its use as a medicine and in producing a line of industrial hemp. Outside of North America, Canopy has focused its attention on Spectrum Therapeutics, a brand focusing on dosing CBD oil as a softgel pill.Within Canada, a lot of Canopy's investment went into the Ottawa suburb of Smiths Falls, where there is a palpable nervousness about the Aug. 14 numbers, and how Constellation might react to them. The Bottom Line on CGC StockIf Canopy delivers the revenue growth bulls are expecting, the stock will rise and the pressure will be off. The pending acquisition of U.S.-based grower Acreage Holdings (OTCMKTS:ACRGF) could complicate the outlook.The Acreage deal gives Constellation Holdings more time to exercise warrants giving it majority control. Canopy confirmed Aug. 8 that they were planning on acquiring the right to buy ACRGF for $3.4 billion -- CGC can't fully acquire Acreage until marijuana production and sale are federally legalized in the U.S. Despite the pending acquisition, investors are still trading ACRGF stock, which is down 40% over the last three months.Legal marijuana could well become a gold mine for today's speculators, but the hype train has left the station. Some people are now comparing pot to 3D printing, rare earth metals and solar panels -- three big prospective industries that failed to live up to their promised potential.If you are betting on legal pot in 2019, you should tread carefully and be prepared for some short-term losses.Dana Blankenhorn is a financial and technology journalist. He is the author of the mystery thriller, The Reluctant Detective Finds Her Family, available at the Amazon Kindle store. Write him at firstname.lastname@example.org or follow him on Twitter at @danablankenhorn. As of this writing he owned no shares in companies mentioned in this article. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Real Estate Investments to Ride Out the Current Storm * 7 Marijuana Penny Stocks to Consider for Those Who Can Handle Risk * 7 Safe Dividend Stocks for Investors to Buy Right Now The post Buyers Should Beware Canopy Growth Stock appeared first on InvestorPlace.
On Thursday, Acreage Holdings Inc (OTC: ACRGF) (CSE:ACRG.U) announced it has hired Steve Hardardt as Chief People Officer. Hardardt has more than 30 years of experience as a human resources and operations executive, having worked worked with companies like Dow Jones, Frito-Lay and Monsanto. Benzinga's Cannabis Capital Conference heads to Detroit on Aug. 15 -- Click here to learn more!
After three incredibly successful versions of the Cannabis Capital Conference, the Benzinga events team is bringing the next iteration to our hometown of Detroit. The Cannabis Capital Conference takes place Aug. 15 at the Westin Book Cadillac in downtown Detroit. Who Comes To The Conference? The most important part of Benzinga events remains the strong focus on connecting well-vetted companies with a high tier of institutional and accredited investors.
Curaleaf Holdings Inc (OTC: CURLF)'s former vice president of Dispensary Operations and Development, Gretchen McCarthy, has joined Acreage Holdings Inc (OTC: ACRGF) as vice president of Retail Operations. McCarthy was responsible for Curaleaf expanding its retail footprint by providing dispensary management and operational guidance for all store locations. Benzinga's Cannabis Capital Conference heads to Detroit on Aug. 15 -- Click here to learn more!
Canopy Growth (CGC) and Acreage Holdings (ACRGF) are at the beginning of a wonderful friendship, and one top analyst believes both have room for growth.Canopy is the world’s largest cannabis company, with a market cap exceeding $11 billion; Acreage is smaller and leaner, with market cap of just over $1 billion. Where Canopy leads the Canadian recreational marijuana industry, setting up dispensaries across the country, Acreage operates in the fragmented American cannabis market, with operations divided among 20 states and cannabis still illegal under Federal law.An acquisition deal between the two companies, agreed on last April, would seem incongruous at best, except that Acreage shareholders agreed early last month to accept Canopy’s purchase offer of $3.4 billion, contingent on the US Federal government legalizing cannabis within 90 months. Canopy put fronted a $300 million cash down payment to seal the deal and will pay the full purchase price – if necessary – in a combination of cash and stock. This Cannabis Bull Likes a DiscountOne month after the deal was approved, Ladenburg Thalmann analyst Glenn Mattson initiated coverage of both Canopy and Acreage, with Buy ratings and aggressive price targets. In his research note, he said, “We favor Canadian companies focused on long-term value creation and gaining market share as well as those with a well-defined plan for potentially entering the US market.” An industry analyst with that bent can’t fail to notice Canopy and Acreage. Mattson sees both stocks with a “bullish long-term outlook.”Mattson said of Canopy, “Despite slower than expected growth in the most recently reported quarter, Canopy Growth remains one of the best ways to play the cannabis space… Canopy has the greatest flexibility to go after new growth opportunities as they emerge.” Mattson gave the stock a solid Buy rating and a $50 price target, for a 53% upside.Canopy sells for $$32 in New York. The average price target of $52 gives the stock an upside potential of 61%. The analyst consensus of Moderate Buy is based on 12 ratings, 7 buys and 5 holds, given in the last three months.Of Acreage, Mattson says the stock has “a solid position in the most attractive areas of the US. Further, the company trades at a significant discount to the implied conversion from the proposed Canopy Growth (CGC) transaction…” His $18 target on the stock suggests an upside of 43%.Mattson is the first top-rated analyst to initiate coverage on Acreage. A Convoluted BackgroundThe Acreage acquisition was part of Bruce Linton’s vision. Canopy’s former CEO had built the company to its status as the only large-cap cannabis producer by prioritizing expansion above all else, and Canopy’s 4.8 million square feet of floor space in licensed growing facilities (plus another 800,000 square feet yet to be approved by Health Canada) and projected peak output of 500,000 kilograms annually are testament to Linton’s drive. Except that he’s now the former CEO.Linton’s expansion was expensive, and put Canopy consistently in the red. He would never have had the cash available to purchase Acreage had he not in turn accepted a purchase agreement from Constellation Brands (STZ), owner of Corona and Modelo beers, and the largest beer importer in the US. Constellation bought a 38% stake in Canopy in October 2018, along with a controlling presence on the Board, with the twin long-term goals of developing cannabis-infused beverages and preparing for eventual full legalization in the US markets.Constellation paid Canopy $4 billion for the stake, and that provided the free cash for Linton to make his move on Acreage. Unfortunately for Linton, Canopy also posted its largest-ever quarterly loss in last June’s fiscal Q4 report, more than $323 million Canadian. Constellation ran out of patience and used its control of the Board to oust Linton. Canopy’s management has been in flux since then, with Linton’s co-CEO Mark Zekulin running things until his own replacement can be found.All of this makes Acreage look stable. It’s the major cannabis grower in the US, operates 88 retail stores, projects up to $500 million in sales next year, and holds its own as one of the top five marijuana dispensary operators in the country. Despite the fragmentation of America’s cannabis market, Acreage should be an easy buy for investors. Except that its share price has tumbled 36% since it approved Canopy’s purchase offer. Canopy’s shares have dropped 24% in the same timeframe.Both Canopy and Acreage have scheduled their next quarterly reports for August 13. We’ll see then if Mattson’s bullish stance is backed up by solid numbers.
Summer has not been kind to Canopy Growth (NYSE:CGC) stock. In fact, it goes back to the end of April, when shares of the Canadian cannabis giant were as high as $52.74. Since then, the shares are down 27.6% compared to a 15.4% decline in ETFMG Alternative Harvest ETF (NYSEArca:MJ), which lists CGC stock as the number five holding of the 38 pot stocks in the exchange-traded fund's portfolio.As there's been a slew of bad news hitting the cannabis space, investors are having second thoughts on Canopy Growth stock. Less than a year after making a $5 billion strategic investment in CGC, Constellation Brands (NYSE:STZ) is taking a more active role in running the company. The beverage behemoth has forced out co-CEO/co-founder Bruce Linton, and put in its own people to run the show.InvestorPlace - Stock Market News, Stock Advice & Trading TipsSo with the decline, do investors have an opportunity to "buy the dip" or do recent developments indicate the stock has even more downside?Let's take a closer look and see what the verdict is for the CGC stock price. A Closer Look At CGC StockWith Linton out of the picture, Constellation is taking an active role in molding the future direction of Canopy Growth stock. So far, the company has not changed its operating strategy. According to a recent investor presentation, it is business-as-usual. The proposed acquisition of Acreage Holdings (OTCMKTS:ACRGF) is still on. With recent acquisitions of C3 and This Works, the company is making side bets on the global commercialization of CBD. * 7 Oversold Stocks To Buy Right Now But despite chasing growth outside of North America, Canopy Growth remains levered toward U.S. federal legalization. This is in contrast to its peer Aurora Cannabis (NYSE:ACB). As I have discussed my recent InvestorPlace article, Aurora is widely placing bets, making that company less dependent on one market to move the needle. With this is mind, Canopy Growth has the edge when it comes to ruling the U.S. market. Legislation to relax federal marijuana laws is moving forward but it could be years before America is a fully open market.In the meantime, investors should be concerned with Canopy stock's current capitalization. With the company yet to turn a profit, the company remains dependent on share issuance to fund operations. The combination of shares, warrants, and convertible notes has left the company exposed to material dilution risks. This limits potential upside for holders of CGC stock. Dilution Could Hurt The CGC Stock PriceThere are two key components to the dilution risk. The first is the slug of warrants Constellation received with its strategic investment. According to Canopy's most recent financials, Constellation holds two tranches of the warrants. The first tranche (called "New Warrants" in the filing) allows Constellation to buy 88.5 million shares at $50.40 a piece. Once these warrants are exercised, Constellation has the right to exercise the second tranche (or, "Final Warrants"), of 51.3 million shares at a price "equal to the 5-day volume weighted average price" prior to exercise. Adding 139.8 million shares to Canopy's current ~345.8 million outstanding share count would be highly dilutive. * 7 Stocks to Sell This Summer Earnings Season The second key dilution risk is the convertible debt Canopy issued in 2018. The $600 million of convertible notes matures in 2023, at which time they can be converted to common stock. The conversion price is $48.18 a share, meaning an additional 12.4 million shares could be issued. However, the dilution risk may be more severe. If shares of CGC stock do not trade above this exercise price in 2023, the company will have to raise more equity to pay off the debt. This scenario would be even more damaging to the CGC stock price. But despite both of these dilution risks, CGC stock continues to trade at an extremely high valuation. Wait Before Buying Canopy StockThe valuation of Canopy Growth stock remains high. Shares currently trade at an enterprise value-to-sales (EV/sales) ratio of 57.4. This is more expensive than ACB, which trades at an EV/sales ratio of 53.5. However, CGC stock sells at a lower valuation than Cronos Group (NASDAQ:CRON), which has an EV/sales ratio of 232.3. Tilray (NASDAQ:TLRY), another major competitor, also sells at a premium to CGC (EV/sales of 75.5).This may make the CGC stock price look cheap, but the sector remains overvalued. With investor sentiment turning bearish, it may pay to wait a while before buying CGC stock. The sacking of Linton and the control grab by Constellation marks a new direction for the company. With U.S. legalization moving further out on the time horizon, it could be years before Canopy stock can live up to investor expectations.CGC's next earnings report is in mid-August. At that point, investors will get a clearer picture on the future of Canopy Growth stock. Investors could buy now, betting on earnings topping expectations. But this highly speculative position may not pay off. There may be a time down the road to buy CGC stock at bargain basement prices. But today is not that time. For now, avoid Canopy stock.As of this writing, Thomas Niel did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Oversold Stocks To Buy Right Now * 7 Stocks to Buy Upgraded by Wall Street * 7 Marijuana Stocks With Critical Levels to Watch The post Despite 30% Dip, Cannabis Giant CGC Stock is Not A Buya¦ Yet appeared first on InvestorPlace.
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