|Bid||206.38 x 800|
|Ask||205.05 x 1000|
|Day's Range||204.59 - 209.29|
|52 Week Range||150.37 - 228.91|
|Beta (3Y Monthly)||1.11|
|PE Ratio (TTM)||16.27|
|Earnings Date||Oct 3, 2019|
|Forward Dividend & Yield||3.00 (1.45%)|
|1y Target Est||226.95|
MKM Partners sees reasons to be bullish on both. From booze-free bars to legalized cannabis, alcohol companies face plenty of competition for consumers’ recreational spending. Constellation Brands shares (ticker: STZ) are up 29% year to date, helped by enthusiasm among analysts, strong earnings, and hopes for its marijuana investments.
Canopy Growth Corp. (CGC), the largest cannabis company in the world by market capitalization, has seen its stock plunge by more than 50% over the last 11 months, dragging down its value from about $20 billion to $9.5 billion today. Now, the Canadian grower faces even more trouble ahead as it racks up an estimated $500 million in losses for the two-year period ending March of 2021, according to Oppenheimer analyst Rupesh Parikh, according to Barron’s as outlined in detail below. The woes at Canopy Growth, whose stock initially soared several-fold after it went public, illustrates both the massive operating and market challenges facing cannabis producers, and waning investor optimism for cannabis stocks such as Aurora Cannabis Inc. (ACB), Tilray Inc. (TLRY) and Cronos Group Inc. (CRON).
The stock has performed better than the market in 2019, and RBC Capital Markets says that there is still more room for the spirits maker to climb.
The past six months have gone from bad to worse for Canadian cannabis producer Aurora Cannabis (NYSE:ACB). In just a few short months, Aurora Cannabis stock has shed nearly 70% of its value as both the industry and the firm itself faced severe headwinds.Source: Shutterstock Despite being a popular pick among millennial investors this summer, ACB stock has been on a downward trajectory. Even worse, it looks unlikely to reverse anytime soon. Aurora Cannabis Stock DowngradeA big part of the reason why the ACB stock price has floundered is due to negative analyst commentary. Most recently, Stifle Nicolaus analyst Andrew Carter gave the stock a "sell" rating with a $5 price target. That's a whopping 30% lower than where the stock is trading today. That's including the massive decline over the past six months.InvestorPlace - Stock Market News, Stock Advice & Trading TipsCarter pointed to the firm's dismal fourth-quarter results. He noted that this is just the beginning of a larger, more concerning story. Carter believes the firm will soon be coming to capital markets, looking for more cash to fund future growth plans. * 7 Momentum Stocks to Buy On the Dip The trouble with that is investors aren't exactly keen on the marijuana industry right now. And that's reflected in the prices of cannabis stocks across the board. Simply put, the uncertainty about the Canadian recreational market coupled with worries about the industry's future as new regulations are proposed has made investing here risky.With the current macroeconomic environment and a skittish market on the table as well, investors are putting their money elsewhere. Future Looks BleakBut even if they were looking to take on a little risk and dip their toe in the marijuana market, Aurora Cannabis stock is likely the last place they'd want to put their money. As I highlighted last month, ACB hasn't given investors much to go on when it comes to future growth prospects.So far, the firm hasn't given any indication about its plans to enter the CBD market. That's a huge growth opportunity that isn't marred with as many regulatory challenges as the recreational cannabis industry is.Even more importantly, though, is the fact that ACB doesn't have any commercial partners to help it grow in the retail space. This is a big deal for a few reasons.First, in order for pot products to gain momentum, they need money and reach. Big brands like Molson Coors (NYSE:TAP) and Constellation Brands (NYSE:STZ) have been inking deals with cannabis companies to bring their products to market. However, ACB hasn't buddied up. That added safety simply isn't there for ACB investors.Not only that, the fact that no big-name brands have cozied up to ACB should raise some major red flags. The company even brought on Nelson Peltz as a strategic advisor in order to help the firm find a strategic partner. It's worrying that six months later, there's been no movement in that department. Time is Running Out for ACBIt's hard to find any upside in Aurora Cannabis stock right now. As the industry comes under pressure, competition will heat up. Plus, ACB's better-funded, more exposed rivals will likely come out on top. Unfortunately, Aurora appears to have missed that boat. As the firm starts searching for ways to fund its future, it will likely struggle to find investors willing to take that risk. The Bottom LineNormally, I love a turnaround story. And I truly believe that following Warren Buffett's advice to be fearful when the market is greedy and greedy when the market is fearful is hands down the best way to make investment decisions.However, I think the worry surrounding ACB stock right now is well founded. Not only is the company in a precarious position during a turbulent time for the pot industry, but its balance sheet is on shaky ground as well.The firm has paid a staggering amount for its acquisitions over the past few years. Those investments have yet to prove their worth. I'd stay well away from Aurora Cannabis stock for the foreseeable future unless the company makes a drastic about-face over the next few months.As of this writing, Laura Hoy did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Momentum Stocks to Buy On the Dip * 7 Dow Titans Breaking Higher * 5 Growth Stocks to Sell as Rates Move Higher The post There Isn't a Silver Lining for Aurora Cannabis Stock appeared first on InvestorPlace.
Canopy Growth (NYSE:CGC) stock has some big problems. There is no growth at this marijuana company. Net revenue fell to $90.5 million CAD for its June quarter, down from the prior-quarter revenue of $94.1 million CAD.Source: Shutterstock What's more is that CGC's adjusted free cash flow losses widened from the prior two quarters. FCF came in at a loss of $372 million CAD in the latest quarter. This is about even with the prior quarter's loss of $373 million CAD.But after including acquisitions, the adjusted FCF widened to loss of $824 million CAD from a loss of $414 million CAD. This is an increase in adjusted-FCF losses of 99%.InvestorPlace - Stock Market News, Stock Advice & Trading TipsCGC stock won't be rising anytime soon with these kinds of losses. For example, CGC's cash and securities balance fell 30% in the most recent quarter to $3.1 billion CAD. If Canopy Growth keeps draining its cash as it did last quarter, CGC stock will keep falling.Two months ago, I wrote that ex-CEO Bruce Linton told Bloomberg that CGC's goal was to reach $1 billion CAD in sales by March 2020. With sales falling like it did this past quarter, $1 billion CAD in sales won't be reached anytime soon. What Happened to CGC Stock?Recreational cannabis revenue, the biggest portion of CGC's revenue, fell 11% from $68.9 million CAD to $61 million CAD. Even though medical and international sales rose during the quarter, total gross revenue fell 2.9%.More disturbing is the fact that total sales in volume terms (kilograms and equivalents) rose 13%. Total sales volume was 10,549 kilograms and equivalents in the latest quarter against 9,326 kilograms in the prior quarter. But comparing the June quarter with the December quarter, volume increased only 4.4%. * 7 Momentum Stocks to Buy On the Dip So that means the effective cannabis price fell this quarter. You can't keep selling 13% more product and see your gross revenue fall by 2.9%. That is a losing proposition. It also does not augur well for the future of the cannabis industry. In effect, demand was tepid and prices fell.So what does the future look like for CGC stock? Stay Wary Until Demand Shows UpCanopy Growth stock can survive for the time being since it has $3.1 billion CAD in cash and securities. But in the past six months, CGC has bled out $1.7 billion CAD of its cash and securities balance.Most of that money was received when Constellation Brands (NYSE:STZ) invested $5 billion CAD in Canopy Growth stock. It's probably not very happy that its investment has not yet paid off.If CGC keeps losing $824 million CAD each quarter, the $3.1 billion CAD balance will be mostly spent in the next year. CGC stock's market value, now worth $12.9 billion CAD, will dramatically drop. Investors will anticipate the need for another capital infusion and the related dilution effect. Canopy Growth's Game Plan for $1 Billion in SalesCanopy Growth needs to prove how it will reach $1 billion CAD in sales. Presumably, that is the break-even cash flow level of sales. It is going to take much longer than previously anticipated. At this pace, CGC will not achieve even half that amount by the end of March 2020.For example, is the company depending on future markets in the U.S. to open up? Is it solely relying on the regulatory opening of the cannabis-infused edibles market next month? Analysts are calling this "Cannabis 2.0" after the 2018 nation-wide recreational market opened.I highly suspect that is Canopy Growth's game plan. I would wait to buy CGC stock until the company shows signs of being able to sustain itself financially after this edibles market opens up.As of this writing, Mark Hake, CFA does not hold a position in any of the aforementioned securities. Mark Hake runs the Total Yield Value Guide which you can review here. The Guide focuses on high total yield value stocks and was launched on August 30. Subscribers during September receive a 20% discount, plus a two-week free trial. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Momentum Stocks to Buy On the Dip * 7 Dow Titans Breaking Higher * 5 Growth Stocks to Sell as Rates Move Higher The post Canopy Growth Stock Faces Big Problems appeared first on InvestorPlace.
The cannabis industry as a whole continues to face unforeseen pressures, and Canopy Growth (NYSE:CGC) hasn't been an exception to that headwind. But, of all the marijuana stocks worth a closer look now, CGC stock is at the top of that relatively short list.Source: Jarretera / Shutterstock.com That's not been the case in a long, long while. In July, CGC's board of directors, which is mostly controlled by the company's single-biggest shareholder Constellation Brands (NYSE:STZ), terminated CEO Bruce Linton. This led to a disruption at a critical time for cannabis companies.A sequential decline in quarterly revenue rattled owners of Canopy Growth stock in August as well, further fanning already-bearish flames. The backdrop has been decidedly grim.InvestorPlace - Stock Market News, Stock Advice & Trading TipsYet, this month's rebound effort is undeniable, and arguably well-supported. Canopy Growth Stock Takes the LeadSince early this month, cannabis stocks have started to put some distance between themselves in terms of performance. Tilray (NASDAQ:TLRY) is up 21% since the end of August, while Aurora Cannabis (NYSE:ACB) has broken even and CannTrust Holdings (NYSE:CTST) has given up 13% of its value.CGC stock is at the upper end of that performance race, gaining nearly 19% this month.The divergence likely has much to do with an increasing understanding of each companies' nuances following a wave of earnings reports. * 7 Momentum Stocks to Buy On the Dip That's certainly been the case for Canopy Growth, which has enjoyed the added benefit of interim CEO Mark Zekulin making a proactive effort to unwind some of the damage that's been done to Canopy Growth stock over the course of the past two months. His focal point?"We have been in construction for 70 months," Zekulin told CNN. "We have four months left on that expansion plan. … A lot of that work is now done and the real focus is taking the chess board that we've set and really focusing on now executing."The market seems to be buying the idea, although there's an even bigger reason CGC stock could have rekindled its bullishness. Winning Where it CountsThe cannabis industry is still gelling, and its players are still trying to figure out their place in it.Canopy Growth's place is, for the most part, recreational marijuana -- and recreational marijuana in Canada in particular. For the quarter ending in June, 72% of revenue was made up by sales of recreational cannabis, and only 12% of its sales were made to international customers. And, 80% of its gross sales were of dry cannabis used for smoking.The revenue headwind was and is a legitimate concern. But a couple of key details were glossed over by a market that was ready to see the glass as half empty rather than half full. Chief among those details is the fact that the revenue lull wasn't the indication of waning demand it was being made out to be.The evidence: The average selling price of cannabis, per gram, in Canada hasn't swayed since mid-July, holding steady at $7.22 CAD. Prices in the United States, meanwhile, have actually improved since mid-July, negating the chatter that supply has far outpaced demand.In that vein, although the quarter ending in June wasn't the one Canopy Growth stock owners were hoping for, demand continued to rise. Adult-use purchases of cannabis in Canada reached a record $85 CAD million in June, rising for a fourth-straight month.That's right in Canopy's sweet spot. And it's happening at a time when the company is about to maximize all those pieces on the proverbial chess board. The Bottom Line for CGC StockDon't misread the message. Canopy still has much to prove, and even with the recent selloff, the stock remains outrageously overvalued.That's not a particularly big liability in this instance though. While Canopy Growth admittedly spent too aggressively on acquisitions, those acquisitions do improve the company's capacity to connect with consumers and secure more supply. Canopy just needs to get more out of those assets. That's in the works, even before a new CEO takes the helm.How far or how high that might take CGC stock remains uncertain. But, up 20% from last month's low is a good start to a rebound. And it has plenty of backing via lip service.You could certainly do worse.As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can learn more about him at his website jamesbrumley.com, or follow him on Twitter, at @jbrumley. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Momentum Stocks to Buy On the Dip * 7 Dow Titans Breaking Higher * 5 Growth Stocks to Sell as Rates Move Higher The post Canopy Growth Stock Emerges as Top Pick appeared first on InvestorPlace.
We are coming up on the one year anniversary of the nationwide legalization of cannabis in Canada. In that year, shares of Canadian cannabis leader Canopy Growth (NYSE:CGC) have been on a roller coaster ride. Canopy Growth stock shot out of the gates, fully loaded with guns blazing, in late 2019.Source: Jarretera / Shutterstock.com Canopy had scored a big, multi-billion dollar investment from alcoholic beverage giant Constellation Brands (NYSE:STZ), leveraged that investment to obtain more growing capacity than peers, and from day one, captured about 30% of the Canadian cannabis market.In response, CGC stock soared from $25 in July 2018, to over $50 by October.InvestorPlace - Stock Market News, Stock Advice & Trading TipsCanopy Growth stock has since swung violently between $25 and $50 over the past several months. In late 2018, CGC stock dropped towards $25 as global growth concerns weighed on what was unchecked optimism in the cannabis space.Then, in early 2019, CGC stock roared higher as the company made promising international expansion moves, especially in the U.S. Since, the stock has tumbled, mostly because the company's growth ramp in Canada has meaningfully slowed in 2019. * 7 Tech Stocks You Should Avoid Now Net net, it's been a wild year for CGC stock. What's next?I think the next big move in CGC stock is likely to be a rally back towards $50. Why? Three big reasons. Those three reasons are as follows. Capacity Build-Out and Sales GrowthThe first big reason to believe that CGC stock could rally back towards $50 over the next few quarters is that the company is laying the groundwork for re-accelerated sales growth by rapidly expanding growing capacity.Specifically, despite sluggish and disappointing sales trends recently, Canopy Growth has managed to substantially increase its growing capacity during this slowdown. Last quarter, Canopy's harvest measured around 41,000 kilograms - up nearly 200% sequentially and over 300% year-over-year, and by far away the biggest harvest of any Canadian cannabis company.Since then, the company has only increased growing capacity. They just won an extraction license for a new facility in Saskatchewan, which is expected to come online in Fall 2019 and extract around 5,000 kilograms of hemp a day.Broadly, then, Canopy is rapidly increasing their growing capacity. Ultimately, this ends with Canopy having a lot more supply than all of its competitors, which results in Canopy selling a lot more weed than all of its competitors, too.Big picture - Canopy's sales trends are slowing right now, but huge growing capacity expansions imply that this slowdown will be replaced by acceleration pretty soon. Rec 2.0 Will Create A Rising Cannabis TideThe second big reason to believe that CGC stock could rally back towards $50 over the next few quarters is that the legalization of cannabis 2.0 products will create a rising tide across the whole cannabis industry that should lift all boats.Specifically, in late 2019, Canada is set to introduce a whole new portfolio of cannabis products into the legal market, including edibles and vapes, which are two of the most popular ways to consume cannabis. The introduction of these new cannabis products will increase the legal market's reach, broaden demand and interest, and ultimately grow the market. This broad market growth should provide a rising tide which lifts all boats.Further, because of the company's huge capacity build-out, Canopy Growth could actually be a huge winner with rec 2.0. Just consider, at the same time that a slew of new cannabis products are months away from coming to market, Canopy is aggressively building out their cannabis supply.That combination ultimately implies that Canopy is gearing up to sell a bunch of rec 2.0 cannabis, meaning growth rates in 2020 could look a lot prettier than they do today. Gross Margins Will Improve MeaningfullyThe third big reason to believe that CGC stock could rally back towards $50 over the next few quarters is that gross margins are set to improve meaningfully.Canopy's gross margin performance to-date has been disappointing. This was once a 40%-plus gross margin business. Over the past few quarters, gross margins have dipped into sub-20% territory as the company has emphasized capacity build-out and retrofitting. But, this capacity build-out won't last forever.Instead, it appears that the bulk of this capacity expansion is over. If so, then overall gross margins will improve meaningfully over the next few quarters, since gross margins last quarter ex capacity and retrofitting impacts were around 32% - versus the reported 15%.Further, management plans to start optimizing their growing facilities soon. That will provide a lift to gross margins, too. Even further, rec 2.0 cannabis products carry a higher gross margin, so that will provide another lift to gross margins.At the end of the day, management is pointing towards 40% gross margins by the end of fiscal 2020, and the fundamentals make it seem like that target is entirely doable. Thus, over the next four quarters, gross margins have potential to go from 15% to 40%. That's a big enough uptake to provide a meaningful tailwind for Canopy Growth stock. Bottom Line on Canopy Growth StockCGC stock has been through turbulent times. It's unlikely that this turbulence will subside any time soon, but turbulence is a double-edged sword. It means big drops and big rallies. The next move in Canopy Growth stock will likely be a big rally, so taking advantage of the turbulence and buying Canopy Growth on this dip seems like a smart move.As of this writing, Luke Lango was long CGC. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Recession-Resistant Services Stocks to Buy * 7 Hot Penny Stocks to Consider Now * 7 Tech Stocks You Should Avoid Now The post 3 Reasons Canopy Growth Stock Could Rally Big in 2020 appeared first on InvestorPlace.
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The Zacks Analyst Blog Highlights: Anheuser-Busch, Tilray, Boston Beer, Constellation Brands and Aphria
Coming down from a high can be a real drag. A high stock price, that is. Case in point, Canopy Growth (NYSE:CGC) which closed Friday at $27.46, coming down from a 52-week high of $56.90. There are industry concerns in terms of overcapacity of dry cannabis that has taken CGC stock lower. In addition, the company's missing analyst estimates for first quarter of fiscal 2020 didn't help in terms of stock momentum.Source: Shutterstock However, I am of the opinion that the downside might be overdone for Canopy Growth stock. I further believe that any level below $30 is attractive for gradual exposure to CGC. Before I talk about the positive triggers, I must mention that Canopy Growth is for long-term exposure.The industry is still at an early growth stage and cash burn will continue. At the same time, CGC is well positioned to be among the leaders in the cannabis (recreational and medicinal) industry. It therefore makes sense to be invested in a potential value creator.InvestorPlace - Stock Market News, Stock Advice & Trading Tips Spectrum Therapeutics will Drive GrowthSpectrum Therapeutics is a wholly owned subsidiary of Canopy Growth. The subsidiary is focused on research & development related to medical therapies. I believe that Spectrum is a key growth and margin expansion catalyst for Canopy Growth in the next 3-5 years.To put things into perspective, Spectrum already has 1,000 patients participating in clinical trials. The company has 60 to 70 trials ongoing or completed.The key point -- Spectrum is targeting medical therapies in sleep aid, pain relief, anxiety relief and animal health products. * 10 Stocks to Sell in Market-Cursed September With a broad target market, export licenses in 10 countries and a deep pipeline of clinical trials, Spectrum is positioned to deliver value for CGC.It is worth mentioning that CGC already has 111 patents with 270 patent applications. This underscores the point of intense R&D that is likely to translate into high-margin medicinal products.Amidst the bull talk, it is important to mention that even when medicinal products are launched; it would need high marketing expenses. Margins can be suppressed and EBITDA growth will be very gradual. Higher Margin Product LaunchIn the first quarter results release, CGC has mentioned that the company will be launching value-add higher-margin products in October 2019, as the second phase of Canadian legalization comes in.The high-margin products will potentially include beverages, athletic drinks and various wellness products. As an example, the acquisition of "This Works" will allow the company to launch range of natural skin care products. Similarly, cannabis-based beverages and vapes are in the pipeline.CEO Mark Zekulin said on last month's post-earnings conference call: "We believe that high quality cannabis beverages that offer sophisticated taste, better bioavailability and dose control, along with zero or low calories options and little or no drug interaction, will appeal to not only to current cannabis consumers, but also expand the cannabis consumer category to reach a larger portion of the population."Even with the launch of valued-added high-margin products, EBITDA margin expansion is unlikely on an immediate basis. But I do expect positive impact well into 2020 and 2021. Observations on Cash BurnFor 1Q 2020, CGC reported negative operating cash flow of $158 million. This would imply negative annual cash flow of $630 million. Considering the company's investment in R&D, sales and marketing, among others, I believe EBITDA margin will remain depressed. Along with this, operating cash flows might remain negative.However, as of June 2019, CGC reported cash & equivalents of $1.8 billion. Considering the annual rate of cash burn, the current cash holding provides a buffer for three years. This is just an approximation, but seems to imply that Canopy Growth has enough cash to continue investing in research and marketing.At the same time, the company is backed by Constellation Brands (NYSE:STZ), which I interpret as meaning that an extended period of cash burn is not a concern. * 10 Battered Tech Stocks to Buy Now I do expect consolidation in the cannabis industry and Canopy Growth stock is likely to have a good acquisition appetite. Final Thoughts on CGC StockCGC stock has trended lower in the last 12 months, understandably, considering that cash burn worries the markets. But the company's revenue growth has remained stellar.At the same time, Canopy Growth is among the best in the industry when it comes to investing in R&D. I expect the company to be among the leaders in medicinal cannabis.The launch of high margin products next month needs to be closely monitored in terms of market response. It can be a potential game changer for Canopy Growth stock.Overall, CGC stock is worth accumulating at current levels. While I don't advise a big plunge in the stock or the cannabis industry, gradual accumulation makes sense.As of this writing, Faisal Humayun did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Big IPO Stocks From 2019 to Watch * 7 Discount Retail Stocks to Buy for a Recession * 7 Stocks to Buy Benefiting From Millennial Money The post Halved from One-Year Highs, Canopy Growth Stock Is Attractive Below $30 appeared first on InvestorPlace.
It goes without saying that Canopy Growth (NYSE:CGC) has endured a rough summer. Market leadership could not compensate for falling multiples, earnings and revenue misses, and a CEO firing. Canopy Growth has bounced back from near-term lows. Still, it remains too early to tell whether that bounce represents a pause in the decline or a genuine turnaround. Until investors can get a clear direction on CGC stock, I recommend staying away for now.Source: Jarretera / Shutterstock.com Investors Should Prepare for a FallCanopy Growth, and the marijuana industry overall, wants to put this summer behind them. Since the end of April, CGC stock has lost nearly half of its value. Differences with investor Constellation Brands (NYSE:STZ) cost CEO Bruce Linton his job. Moreover, a massive revenue and earnings miss for the second quarter only added to the pain.Unfortunately, the fall could bring a further fall. The price of dried cannabis has failed to gain traction as inventories rise. Further, the cash position of CGC continues to fall as it fell by 36% over the previous two quarters.InvestorPlace - Stock Market News, Stock Advice & Trading Tips * 10 Healthcare Stocks to Buy Despite the Headlines Furthermore, despite the decline, CGC remains expensive. It currently trades at about 37.2 times sales. In the recent past, such a multiple did not phase investors. However, we have dealt with a market where peers such as Aurora Cannabis (NYSE:ACB), Tilray (NASDAQ:TLRY), and Cronos Group (NASDAQ:CRON) have also seen their stocks drop.Moreover, the profit picture looks increasingly bleak. For the next fiscal year, analysts had predicted a profit of 31 Canadian cents (24 cents) per share 90 days ago. Now, that estimate has become a loss of 75 Canadian cents per share. That will place further pressure on its cash and could lead to more debt or more stock issuance in a climate of falling prices. Don't Bet on Quick LegalizationSo what would revive Canopy Growth stock? InvestorPlace contributor Will Ashworth argued that Trump legalizing weed across the country would boost both his re-election chances and CGC.I happen to agree in principle. I also like that CGC positioned itself to jump into the U.S. with the Acreage Holdings (OTCMKTS:ACRGF) purchase once weed becomes legalized. However, we have to operate in the environment we have, not the one we want. Hence, I do not recommend investing based on that piece unless the political winds change direction. While sudden legalization, especially in the U.S., would help Canopy Growth, investors should instead assume legal status comes to the developed world at a slower pace. How Should I Trade CGC?In my view, investors should exit their positions in CGC for now. In the near term, the industry probably faces multiple compression. Investors should not expect the market to grant Canopy Growth stock any type of immunity. Even though fall will arrive soon, investors need to prepare for winter and probably a more permanent climate of lower valuations.Still, once the market stops selling off CGC, I see the equity as a lucrative long-term investment. First, I believe this industry downturn will ultimately benefit CGC stock. Countries across the world continue to march toward legalization.Canada's strict regulatory structure on the marijuana industry has generally not done its companies any favors. However, they helped hugely by seeing the trend toward legalization early and moving first to embrace it. Now, Canopy Growth can use its dominant position in Canada to achieve early mover status in places such as Europe. This process will only speed up should the U.S. move toward legal status more quickly than anticipated.Moreover, the downturn will lead to an industry shakeout. In this downturn, the more financially-troubled firms will have to sell out to larger firms such as Canopy Growth, in many cases on the cheap. Others will simply close their doors. Either way, over the next few years, CGC will face much fewer competitors at home. * 10 Stocks to Sell in Market-Cursed September Canopy Growth stock has become dead money in the near term. However, once it endures a harsh winter, I think it will spring forward to massive long-term gains.As of this writing, Will Healy did not hold a position in any of the aforementioned stocks. You can follow Will on Twitter at @HealyWriting. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Stocks to Sell in Market-Cursed September * 7 of the Worst IPO Stocks in 2019 * 7 Best Stocks That Crushed It This Earnings Season The post Time to Write Off Canopy Growth Stock in the Short Term appeared first on InvestorPlace.
Canopy Growth (NYSE:CGC) has been on a roller coaster so far in 2019. Like much of the rest of the market, Canopy Growth stock came into the year depressed and under pressure.Source: Jarretera / Shutterstock.com However, it didn't take long for shares to go from sub-$30 to $50+ though. That price action took place in the month of January, but bulls have lost that steam.Luckily for InvestorPlace readers, many have been bearish since $38.InvestorPlace - Stock Market News, Stock Advice & Trading TipsAfter plunging all the way down to $22.76, shares are on the rebound. The hard part is determining whether this is a dead cat bounce (i.e. a temporary reprieve before more downside ensues) or a true reversal off the lows. With the recent rally, shares are no longer down more than 50% from the highs, although Canopy Growth stock still sports big losses.Let's take a closer look at the stock to determine what the best course of action is. Trading CGC Stock Click to EnlargeLast week, CGC was a Top Stock Trade on InvestorPlace and I also flagged the name on Twitter. Even though shares are taking a breather, it's important to see that they're holding up above the 20-day moving average. * 10 Stocks to Sell in Market-Cursed September While it would be discouraging to see CGC lose this mark, As long as it stays above $26.25, it looks technically okay for bulls. However, the big question is whether shares can hurdle $30.At $30, CGC stock would approach a significant level on the chart, as well as downtrend resistance (blue line). Above here and Canopy Growth stock can start working on filling the gap up to $32. There's also the 50-day moving average up near $32, although it's declining on a daily basis as well.Over $32 and CGC bulls can start thinking about a return to the 61.8% retracement, which is currently north of $36. But let's not get too ahead of ourselves. We first need to see CGC hold up over $26.25 and push through $30. After that, we can start looking at further upside targets.Below $26.25 and the recent lows near $23 are back on the table. Balance SheetCGC still has a strong balance sheet, but with negative free cash flow and M&A, it's weakening over time.Cash and short-term investments of $2.42 billion are down more than 32% from the quarter ending in December 2018. Current assets are down ~$916 million (-23.7%) to $2.95 billion in the same period, although total assets are up 4.2%.That also comes with 31.3% spike in current liabilities to $284.6 million. Total liabilities have gone from $891 million six months ago to $2.1 billion, up roughly 135%.So while total assets still outweigh total liabilities by nearly three-to-one and there are no concerns about CGC meeting its short-term obligations, the balance sheet is weakening vs. six months ago. Sizing up Canopy Growth StockMany considered Canopy Growth stock (and many others still do) the blue chip cannabis stock to be long.It had the strongest balance sheet, early-mover advantage in both the U.S. and Canada, and strong backers via the $4 billion investment from Constellation Brands (NYSE:STZ).But it's not just CGC stock that's been under pressure. We've seen weakness in Aphria (NYSE:APHA), Tilray (NASDAQ:TLRY), Cronos Group (NASDAQ:CRON), Aurora Cannabis (NYSE:ACB) and most others.Many of the bullish catalysts for CGC and the cannabis industry as a whole are still in place. Both the U.S. and many parts of the globe are working toward legalization. Many companies and startups are focused on cannabis-related treatments and recreational uses.While Canopy reported 250% year-over-year revenue growth for Q1 last month, the results missed expectations. Earnings per share badly missed estimates, although the miss can be explained away by some financial engineering related to expiring warrants. Still, it would have been nice to be provided an adjusted number in the release.Further, it doesn't help that Constellation Brands and Canopy's management had a "strategy clash" in July, which results in Canopy CEO Bruce Linton leaving the company. That adds some uncertainty to the picture.Where does that leave us? The valuation is rich for CGC and most other cannabis plays and that's putting it lightly. That's no secret, but when the news flow is negative and momentum is bearish, the valuation will hurt the share price. We need to see the charts start to cooperate for Canopy Growth to look good on the long side.Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Stocks to Sell in Market-Cursed September * 7 of the Worst IPO Stocks in 2019 * 7 Best Stocks That Crushed It This Earnings Season The post Keep an Eye on Canopy Growth Stock, but Don't Buy It Just Yet appeared first on InvestorPlace.
In the latest trading session, Constellation Brands (STZ) closed at $208.19, marking a +0.7% move from the previous day.
Despite growing sales and wider legalization, many pot stocks have been insanely volatile as Wall Street and investors try to wrap their heads around the marijuana industry. So should you think about buying "cheap" Aurora Cannabis (ACB) Stock before Q4 earnings?
Canopy Growth stock has been praised by many analysts. Here’s what chart analysis shows about buying this marijuana stock right now.
President Trump recently suggested that his administration is taking a closer look at legalizing cannabis at the federal level, moving beyond merely letting the states decide what's right. Such a move would be good for Canopy Growth (NYSE:CGC), CGC stock and most importantly, the president's reelection hopes in 2020. Source: Shutterstock First, before I get into the heart of the matter, let me remind readers that this isn't a political dissertation, it's an investment piece. I could care less whether Trump thinks legalizing at the federal level is a vote-getter, which it is because I'm Canadian. I have no dog in this fight, politically or philosophically. Instead, I'm interested in what this would do for the U.S. cannabis industry, on a general level, and for Canopy Growth, more specifically.InvestorPlace - Stock Market News, Stock Advice & Trading TipsLet me address both. What Federal Legalization MeansOne only needs to read the comments after an article on the subject to know that most Americans are supportive of federally legalized cannabis. "That's [Trump's comments] signalling to the rest of his Republicans that you know what, it's basically okay to have a view around cannabis. The reason he is doing it is because in the United States 95 per cent of the country believes in medical cannabis, and 66 per cent believe in adult-use or recreational cannabis," said Acreage Holdings (OTCMKTS:ACRGF) CEO Kevin Murphy recently.Just 11 states and the District of Columbia have legalized recreational pot. A total of 33 have legalized medical marijuana. That leaves 39 states where recreational cannabis is illegal and another 17 states that don't allow medical marijuana. Under the current situation, pot can't be transported across state lines because cannabis isn't legal at the federal level. This means that if you want to sell in Colorado, you've got to make it in Colorado or buy it from a grower that does. State politicians love this set-up because it means local jobs, taxes, etc. * 10 Buy-and-Hold Stocks to Own Forever However, in a country of 325 million, it's an incredibly inefficient way to operate an industry. Could you imagine if a company like Wayfair (NYSE:W) had to live by the same rules? It can't make money as it is, and it's got one of the best logistics systems in retail. Here in Canada, we used to have similar rules in the beer business. Up until 1992, if you wanted to sell beer in Ontario, it had to be made in Ontario. That meant breweries were operating in every province in the country, including Prince Edward Island, which had a population of 130,827 at the time. The Canadian government finally came to its senses and removed those trade barriers. Well, you would think someone who is opposed to government regulations and red tape as Trump is, would see the inefficiencies of a system left up to the individual states.Why should a state like California, whose population is greater than all of Canada, not be able to provide California-grown pot to people living in Rhode Island? If it is a quality product at a reasonable price, you would think "Businessman" Trump would be all over that.I can see how raising the federal minimum wage would rankle some states used to operating lower-wage economies, but failing to legalize pot at the federal level is terrible business. Were the Republicans or Democrats to push for legalizing pot at the federal level -- a process that isn't nearly as easy as it seems -- before the November 2020 election, I believe that this move would motivate a lot of younger voters to get out to cast their ballot. Economically, it would be a boon to all stakeholders. How CGC BenefitsAs you might be aware, Canopy has a tentative deal in place to buy Acreage Holdings for $3.4 billion, but only if the production and sale of cannabis become federally legal. Further, the agreement has a seven-year window before the right to buy the company expires.For this right, Acreage shareholders received an immediate $300 million ($2.55 a share) cash payment as an incentive to wait for federal legalization. In the meantime, Acreage has licenses to produce cannabis in 20 states, 87 dispensaries and 22 cultivation and processing sites. It's a going concern that will continue to grow its business in the U.S. with Canopy lending its expertise, both in terms of growing the stuff, distributing it and building a wider audience. With Bruce Linton having left the company and a CEO search underway, it's a good thing that the Republicans haven't been talking up legalization because the company's controlling shareholder, Constellation Brands (NYSE:STZ), is still ensuring Canopy's ducks are all in a row. The fact that Trump's open to discussing the idea means a CEO hire is probably going to happen sooner rather than later. In the meantime, interim CEO Mark Zekulin is more than capable of running the show. The company's Sept. 4 presentation at the Barclays 2019 Global Consumer Staples Conference stated that Canopy could reach a revenue run rate of C$1 billion in the fourth quarter with its gross margin 40% or higher.Between the second-phase of Canadian legalization (edibles, infused drinks, concentrates), increasing its Canadian distribution at the retail level, international expansion outside North America, and of course, its U.S. push, which includes Acreage, hemp-related sales, etc., the new CEO is going to have their hands full. So, maybe, finding the right person isn't going to happen overnight after all. * 7 "Boring" Stocks With Exciting Prospects What I do know is that CCG benefits greatly from federally legalized cannabis. I'm sure the lobbying is going to intensify in the months leading up to the election. The Bottom Line on CGC Stock I believe that Canopy Growth is one of the best Canadian cannabis stocks available. However, to become a global player, it needs to be a part of the U.S. marketplace. The Acreage deal makes that a reality. Federal legalization is coming, but it can't get here fast enough. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 3 Artificial Intelligence Stocks to Buy * 7 Industrial Stocks to Buy for a Strong U.S. Economy * 3 Beaten-Down Bank Stocks to Buy and Hold for the Long Term The post Why the Future of Canopy Growth Stock Is in the Hands of the President appeared first on InvestorPlace.
As one of the leaders of the cannabis sector, Canopy Growth (NYSE:CGC) stock has had its share of ups and downs over the years. Lately, the firm has had a lot more negatives than positives, and much of that pain has been self-inflicted.As a result,Canopy's big backer, Constellation Brands, (NYSE:STZ) had a major falling out with Canopy. Constellation seemingly forced out Canopy's CEO, and has now overhauled its whole management team. Consequently, CGC has reworked its strategy.Source: Shutterstock In recent months, traders have dumped CGC stock, due to both the lousy marijuana stock environment and Canopy's particular issues.InvestorPlace - Stock Market News, Stock Advice & Trading TipsIt's not surprising that traders are nervous, given that the firm still doesn't have a permanent CEO or positive earnings per share at this point. However, give credit where it is due. The company's new CFO, Mike Lee, is making a solid pitch to the market. Lee, for those unfamiliar, previously worked for beverage companies, including E & J Gallo Winery and Pepsico (NYSE:PEP). Most recently, he served as a senior VP in Constellation's wine and spirits business, making him a natural pick as Constellation tries to right CGC's ship.Lee just took over as acting CFO at the beginning of June. Despite his brief tenure, Lee made a strong argument for sticking with CGC stock earlier this month at the Barclays Consumer Staples conference. Let's start with his explanation for one of the bears' biggest concerns about Canopy Growth stock: CGC's weak profitability and its large operating losses. * 7 Industrial Stocks to Buy for a Strong U.S. Economy Canopy Explains Its Weak Profit MarginsA big bone of contention surrounding CGC stock has been its weak profit margins. Canopy's gross margin slumped from the 40% range to barely 20% in recent quarters.Lee said that some folks have not really understood what's been going on. When Canopy launched, he says, the company had three large growing facilities available. It could either go "pedal to the metal" to get production rolling full blast from day one or take a more measured approach. CGC went for the first option, grabbing a big chunk of the initial market share.As a result, however, its operations had some serious inefficiencies. Canopy is now reworking its production. But its overhead costs remain high, which makes its whole profit/loss picture look ugly. Once its facilities are reconfigured to a more optimum set-up, however, Lee says that Canopy will get back to 40% gross profit margins. He expects that to occur "in the near future."At the moment, he says,CGC is generating gross margins in the mid-to-high 30s range once those extra costs are backed out. And with optimization and a better product mix, its margins will surge back over 40% again, the CFO stated. This metric will be a key test for CGC stock in coming quarters. The new management team has laid out a clear and credible path to improved profitability. Let's see if it can deliver. Big Vaping PushCanopy likes to talk about how Canada is entering the recreation 2.0 stage of the market. That is, the cannabis sector is becoming a much wider playing field as new products such as edibles come online. A big part of Canopy's strategy revolves around vaping. Unlike its peers, who are marketing third-party products, Canopy has had its team develop in-house capabilities that could be a huge boon for CGC. According to Lee, its new CFO:"So, we're coming out with plus or minus 15 SKUs, multiple devices, a variety of price points. And I can't steal the thunder from announcements coming later this year, but we think that it's going to be a very competitive portfolio of products that, yes, we think will grow the category, perhaps convert some of the illicit market into the legal market […] so it's very important."Building a proprietary product portfolio is appealing. It results in much higher margins, after all, since the proceeds don't have to be shared with a middleman. Given its efforts to develop its own vaping products, CGC has a built-in catalyst. Traders can look forward to its forthcoming announcements on vaping later this year.And, as Lee rightly notes, one issue with the marijuana market in Canada so far is that many people keep buying product through back channels. If Canopy can help spur more people to buy cannabis legally, it would help clear the inventory backlog that has been a thorn in the side of so many marijuana stocks this year. The Verdict on CGC StockInvestorPlace contrubutor Luke Lango recently explained why he is still bullish on the long-run outlook of CGC stockThe big picture here is that you have a cannabis industry that is in the top of the first inning of a multi-year, global growth narrative […] Judging the long-term fate of a cannabis company because they missed sales or earnings estimates last quarter seems … foolish.I don't own any CGC stock at this point. I expect the cannabis industry to continue to have challenging months ahead as it struggles with oversupply. But for a long-term investor who is willing to endure potential losses for the time being, Canopy Growth looks like one of the better options.Constellation is a well-funded backer, and it appears that it's putting a competent management team in place to run things going forward. Let's see who takes over as its CEO, but in the meantime, the new CFO is offering a reasonable plan that could pay off well in coming years.At the time of this writing, Ian Bezek held no positions in any of the aforementioned securities. You can reach him on Twitter at @irbezek. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 3 Artificial Intelligence Stocks to Buy * 7 Industrial Stocks to Buy for a Strong U.S. Economy * 3 Beaten-Down Bank Stocks to Buy and Hold for the Long Term The post Canopy Growth's New CFO Has a Credible Plan to Revive the Company appeared first on InvestorPlace.
Cannabis Countdown: Top 10 Marijuana Industry News Stories of the Week Welcome to the Cannabis Countdown . In this week’s rendition, we’ll recap and countdown the top 10 marijuana industry news stories ...
From a broad standpoint, the case for Canopy Growth (NYSE:CGC) stock has been relatively simple. Specifically, the argument has been that CGC stock offers the simplest way to play the cannabis boom, largely thanks to the multi-billion dollar investment in the company by Constellation Brands (NYSE:STZ,NYSE:STZ.B).Source: Shutterstock That US$4 billion investment gave CGC a war chest it can use to capitalize on opportunities. The funds enable the company to execute acquisitions to build out its business, and it already has tied up with U.S. operator Acreage Holdings (OTCMKTS:ACRGF). Additionally, the cash has enabled CGC to develop its distribution and processing capabilities. * Dorian's Impact on the Markets In theory, Canopy can go wherever cannabis demand is growing. And bulls saw plenty of growth coming for the industry.InvestorPlace - Stock Market News, Stock Advice & Trading Tips Canopy's Outlook Has DeterioratedThat story now looks broken. The industry on the whole doesn't look quite as healthy as optimists had hoped. Canopy appears to be losing market share in Canada. The combination has pressured Canopy Growth stock, which has fallen by half in a little over four months.There's a case to buy CGC stock after its decline, and indeed some investors have done just that in recent sessions. The long-term opportunity provided by Canopy Growth stock still looks reasonably intact. CGC even looks potentially cheap from the right angle. Its execution can, and perhaps should, improve.But for the shares to rise, Canopy Growth is going to have to regain the confidence of investors. To do that, Canopy will need to improve itself, and it may need some external help as well. CGC Stock Falls (Again) After Its EarningsThere are several reasons why Canopy Growth stock has steadily dropped since late April. For one, the entire sector has sold off.Major cannabis plays like Cronos Group (NASDAQ:CRON), Hexo (NYSE:HEXO), and Aurora Cannabis (NYSE:ACB) all have dropped at least 19% in the last three months. Aphria (NYSE:APHA) posted probably the sector's best earnings report this year and is up just 5% over the past quarter. However, it's still down about one-third from its April highs.But that alone doesn't explain the pressure on Canopy Growth stock. It's been the worst performer among major marijuana stocks over the past three months, dropping 36%. And the company's last two earnings reports have been a key factor in the decline of its shares.In fiscal Q4, its cannabis revenue surprisingly declined quarter-over-quarter. In Q1, Canopy's sales did rise compared with the previous quarter . But its revenue still missed expectations, and the company also booked a C$8 million reserve for customers' returns of oil and softgel products.Its gross margin of 15% seems far too low. Even excluding about 17 percentage points of pressure from factories that were either underutilized or not yet producing, its 32% gross margin was notably weaker than its recent performances.Two quarters don't necessarily make a trend, but they've been more than enough to worry investors. CGC's revenue growth is slower than that of its peers. Its margins and profitability have been disappointing. The company was supposed to be the undisputed leader in cannabis, particularly in Canada. Its rivals are catching up in terms of revenue and Canopy, at least in the early going, is much less profitable than investors had hoped. Industry Worries Add to the Pressure on Canopy Growth StockThe issue is that Canopy's earnings match some of the concerns facing the industry as a whole. The growth of recreational cannabis in Canada has been slowed by permitting backlogs, leading to much lower-than-expected overall sales.Production continues to ramp across the sector, leading to worries about oversupply and pricing pressure. Canopy's forecast of overly saturated oils and softgel markets - which should be higher-margin products - augments those worries. So does a big price decrease by Tilray (NASDAQ:TLRY) the day before Canopy's fiscal Q1 release.The takeaway from Canopy earnings - and those of the sector - is that maybe this business isn't quite as attractive as bulls had thought a few months ago. Cannabis companies' long-term profit margins may be lower than expected. Movement on legalization outside of Canada has been modest. In Canada, the sheer number of players means "race to the bottom" pricing may pressure companies' near-term results.All told, worries are mounting. And with CGC, even net of cash, trading at something like eight times average fiscal 2020 revenue estimates, it's not surprising that the stock has pulled back. How CGC Stock Can ReboundAll that said, bulls can - and do - argue that the long-term outlook of CGC stock really hasn't changed all that much. Canopy still has its war chest, with US$1.5 billion of cash net of debt. Its production leads the industry. The weakness of its earnings per share isn't a surprise; indeed, it's part of the plan, as Canopy extends its capabilities in flower and derivatives, and develops its supply chain.Canopy is looking to redefine the vaping experience, as management detailed on the company's Q1 conference call. It has a presence in the medical and pharmaceutical end markets. It's entering the U.S. CBD market, and can participate in that market via Acreage when and if the federal government legalizes cannabis.Even the company's long-term financial targets remain intact, including guidance for EBITDA profitability (excluding some items) in FY22. So what really has changed?The answer is confidence, in terms of both Canopy itself and the industry as a whole. Clear market-share losses at this early stage are a real concern. So are potential price declines for cannabis flower, and weaker-than-expected demand for derivative products. Canopy is reiterating its targets, but investors are less likely to believe them.Simple sector momentum no longer can carry Canopy Growth stock higher. The "easy" bull case of buying the leader in the space doesn't make sense if investors worry the company won't be the leader in the long-term. Canopy Growth - and the industry as a whole - need to answer key questions before investors can become confident in CGC again, and before CGC stock can rally.As of this writing, Vince Martin has no positions in any securities mentioned. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Deeply Discounted Energy Stocks to Buy * 7 Stocks to Buy In a Flat Market * 10 Stocks to Buy to Ride China's Emerging Wealth The post Canopy Growth Stock Suddenly Has Become a Turnaround Play appeared first on InvestorPlace.
CFO David Klein mentioned that the company — which produces Corona beer and Robert Modavi wine, among other brands — has noticed that while Gen Z consumers are drinking less, there’s been an uptick in alcohol consumption by millennials. Klein said research found that the average millennial consumed about 24 drinks a month in 2013, but in 2019 that’s gone up to 29 drinks a month. “I think what we have is people saying that they’re drinking less or drinking better,” he said.
The cannabis industry enjoyed tremendous investor enthusiasm in 2018, fueled in large part by major developments which seemed to open up the space for new opportunities. In spite of the fact that cannabis stocks overall failed to perform up to expectations last year, 2019 has already revealed continued anticipation regarding this growing industry. If cannabis stocks are to thrive going forward, it's likely that many companies will have some growing up to do.