Canopy Growth Corp (OTCMKTS:TWMJF) has been on a torrid run higher. The company is still sitting in the catbird seat ever since Wall Street prime brokers looked under the hood back in October and advised Constellation Brands (STZ) to make a major investment in the name. That move clearly solidified Canopy as an elite player in the cannabis production space. Shares have been running in a leadership position ever since, running from about $10/share to around $26/share in just a couple months.
In that time, the company has continued to pile up the cash, with nearly $110 million sitting on the balance sheet at this point. Shares have continued to soar well above major moving averages on a remarkably steep increase in average trading volume per session on a dollar-weighted basis. That is the very definition of a robust trend higher. We continue to see aggressive moves as well, with an interesting push to build out rapid capacity expansion, capped by the company’s recent announcement to form a new company, Les Serres Vert Cannabis Inc., together with Les Serres Stéphane Bertrand Inc., a large-scale tomato greenhouse operator in Mirabel, Quebec, meant to convert the space into another high-capacity cannabis production resource.
Canopy Growth Corp (OTCMKTS:TWMJF) is one of the bigger growers in the industry. The company produces and sells medical marijuana in Canada. It offers dry cannabis and oil products primarily under the Tweed and Bedrocan brands. It also sells its products through online.
According to company materials, “Tweed is the most recognized marijuana production brand in the world. It has built a large and loyal following by focusing on quality products and meaningful customer relationships. Tweed doesn’t just sell marijuana, it facilitates a conversation about a product we’ve all heard about but haven’t met intimately yet. It is approachable and friendly, yet reliable and trusted. As marijuana laws liberalize around the world, Tweed will expand its leading Canadian position around the globe.”
Also from their materials, “Bedrocan is the epitome of medical-grade cannabis. Bedrocan BV pioneered medical cannabis in Holland through decades of selection and refinement, leading to standardized, whole bud cannabis strains that patients can rely on. Bedrocan Canada supplies the same standardized strains to the Canadian market through exclusive licensing rights to the American continents, an arrangement it will also enjoy for all future genetic advancements. Due to its consistency over time, Bedrocan’s strains have been used in clinical research in seven European countries. That commitment to research didn’t stay on the east side of the Atlantic – Bedrocan Canada recently launched one of the largest clinical cannabis studies in the world, the EQUAL Study, to evaluate quality of life before and after medical cannabis use.”
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As noted above, we have been big fans of this name for more than the trailing twelve months. Our sense is that this stock really carved out a new level of legitimacy when it inked a minority stake deal with Constellation Brands because that deal signaled to the street that this industry could stand up to the scrutiny of an old school Wall Street chain gang.
Since then, Canopy has continued to make key moves, piling up the operational cash levels and putting it to use to build out capacity to maintain its position as one of perhaps the top three best-of-breed names in the space. As we look ahead to 2018, we expect more from the company as it puts that cash to use. Given that the latest from the company has been about production capacity, we would look next toward something in the form of further verticle expansion to continue to build diversification into the model. That type of move might light yet another fire under the name.
Earning a current market cap value of $2717M, TWMJF has a significant war chest ($108.9M) of cash on the books, which must be weighed relative to about $1.6M in total current liabilities. TWMJF is pulling in trailing 12-month revenues of $57.9M. In addition, the company is seeing major top-line growth, with y/y quarterly revenues growing at 106.7%. We will update the story again soon as further details emerge. Sign-up for continuing coverage on shares of $TWMJF stock, as well as other hot stock picks, get our free newsletter today and get our next breakout pick!
Disclosure: we hold no position in $TWMJF, either long or short, and we have not been compensated for this article.