Breaking Down the Bull Thesis on Canopy Growth Corp (NYSE: CGC)

Canopy Growth Corp (NYSE: CGC) is rising more than 50% this month as the cannabis industry ramps up across the board. CGC is certainly one of the most encouraging stocks in the sector. Constellation Brands is now invested heavily in the company that is aiming to be one of Canada’s biggest cannabis producers on the cusp of legalization. Not to mention, Tilray short-sellers have been getting hammered making many of the like rethink the proposition.

There is plenty to like for a bullish outlook. CGC has seven facilities, over 2.4 million square feet of production capacity and operations in nine countries. Plus, the company has 36% committed recreational sales the day legalization takes place in October. Many analysts are very critical of the company’s valuation, but, though it might be a tad high, it is not hard to imagine. The price is based on CGC grabbing a large share of the global market and the company is well positioned to do so.

Canopy Growth Corp (NYSE: CGC) 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 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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The bull thesis for CGC is especially conceivable after the bet Constellation Brands placed on them. Constellation Brands will be investing $5 billion in Canopy Growth, increasing its stake to ~38%. STZ will also receive additional warrants for $4.5 billion which, if exercised, make it majority shareholder. Plus, the financial benefits are replete. Five billion dollars is a massive amount for the industry, and dwarfs what Canopy has raised in the past. Its latest financing only took in $600 million, and the company has only raised between $1.1 and $1.3 billion in the past three years.

This money will lead to a slew of new acquisitions – most likely abroad – and if all goes to plan, this stock could even be undervalued at its current price.

Canopy Growth Corp (NYSE: CGC) has a market cap of 12.4B and a float of 177.98M. The stock is one of the premier producers and its board is getting revamped with Constellation folks, which should make sure that management stays on course. Sign-up for continuing coverage on shares of $CGC 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 $CGC, either long or short, and we have not been compensated for this article.