Why is Canopy Growth so Cheap?

We forecast a significant rise in recreational use.

Andrew Willis 22 October, 2021 | 4:38AM
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Andrew Willis: Cannabis stocks – especially Canadian ones – have been sliding since last winter. Has it been because of profit-taking, or is it punishment for an industry that had a slow inventory rollout?

Whatever the reasons investors had, we expect the Canadian market will see double-digit growth for nearly another decade as distribution expands, consumers convert from the black market and non-consumers become… consumers.

And our flagship Canadian company, Canopy Growth (WEED) – unlike most of its peers here – has a giant deal to get exposure to a market many multiples of what we’ve known so far. A deal that hinges on federal legalization in the U.S., which sector director Kristoffer Inton says remains the greatest uncertainty…

But if that multiplication in customers comes through, and margins reach a projected 50% by 2030, it will be much easier to understand this high-risk/reward opportunity.

For Morningstar, I’m Andrew Willis.

 

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Canopy Growth Corp12.85 CAD-3.24Rating

About Author

Andrew Willis

Andrew Willis  is Editor for Morningstar.ca. Follow him on Twitter @AndrewWillisCDN.

 

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