Canopy Growth Corp (NYSE:CGC) is turning out to be an exciting cannabis stock after bouncing back from a recent steep pullback. The stock is already up by more than 15% for the year even as other stocks in the industry continue to struggle after a recent sell-off.
Taking into consideration the fact that Canopy’s business is unrivaled, underlines the fact that it could be the most significant pot stock in 2018. No other company stands out in the multi-billion cannabis business with a billion dollar market cap. The company has already started making good use of its sheer size and market position further affirming suggestions why it is a must pick in the cannabis space.
Price action already points out to a potential break out, supported by solid fundamentals that have come into being in the recent past. After pulling back from record highs of $30 a share, to the $19 a share level, the stock has bounced back nicely and is now showing signs of recording a new 52 week high.
A surge followed by a close above the $30 share level should open the door for the stock to resume its long-term uptrend. On the downside, the stock faces immediate support at the $25 a share, below which it remains susceptible to fall to the $20 a share level.
About Canopy Growth
Canopy Growth casts itself as a diversified cannabis and Hemp Company, focused on offering distinct brands and curated cannabis varieties. Driven by a passion for leadership in the cannabis sector the company has established partnerships with leading sector names as it looks to safeguard its competitive edge.
Renewed investors interest, after the stock came under immense selling pressure early in the year, does not come as a surprise. Canopy Growth has made significant strides over the past few months by building a robust cannabis cultivation production and distribution network.
Very few companies have what it takes to rival Canopy Growth cannabis production capacity. The company is on course to control 5.7 million square feet of cannabis cultivation space before the end year, a milestone that will take its production capacity to new record highs.
The only rival that has the potential to rival the company when it comes to cultivation is Aurora Cannabis Inc. (OTCMKTS:ACBFF). Canopy Growth annual cannabis capacity is set to hit record highs of 230,000 kilograms a year. Such a feat will allow the company to benefit from economies of scale at a time when demand for cannabis is set to skyrocket in response to the legalization of recreational use.
Unparalleled Distribution Channel.
Canopy Growth boasts of an unparalleled distribution channel that has seen it expand its sales operations overseas. In addition to signing provincial long-term supply deals in Canada, the company has gone forth and signed supply deals in foreign markets.
Recently the company inked a supply agreement with the Manitoba Liquor and Lotteries Corporation for the supply of up to 6,500 kilograms of cannabis products. The supply is expected to meet demand from the adult use recreational cannabis market.
“Signing a supply agreement with Canopy Growth ensures that Manitoba residents will have access to a reliable supply of the most exciting brands and cannabis products available,” said Mark Zekulin, President, Canopy Growth. “As we move closer to a legal adult use cannabis market, supply agreements like this directly support Canopy Growth’s strategy for capturing and increasing market share.
Canopy growth has already completed supply agreements with five provinces and one territory, in readiness of the recreational market coming online in Canada.
The company has also partnered with big- companies like the Bank of Montreal and Constellation Brands which allows its stand out in the legal cannabis business.
Stellar Financial Results
Canopy growth is inching a step closer to becoming a profitable entity if the rate at which revenues are growing is anything to go by. The company reported revenues of $22.8 million representing a 55% year-over-year increase for the quarter ended March 31, 2018. During the quarter, the company sold a record 2,528 kilograms of cannabis, representing a 45% year over year increase.
Net earnings attributed to shareholders amounted to a loss of (-$61.5) million or $0.31 a share. The net loss came into being because of the company investing plenty of its capital resources into activities as it looks to be a key participant in the Canadian recreational cannabis market. The company is also investing in the development of marketing and branding programs.
Canopy Growth remains well positioned to meet the expected cannabis demand thanks to its robust cultivation and production platform. A well spelled out supply and distribution network should allow the company to hit its sales target in the race to profitability. Canopy Group shares should continue to climb higher as investors take note of the solid fundamentals backing up the stock.
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Disclosure: We have no position in CGC and have not been compensated for this article.