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 Corp4.57 CAD-1.72Rating

About Author

Andrew Willis

Andrew Willis  is Senior Editor at Morningstar Canada. He previously produced content for Fidelity Investments and finance industry events for Euromoney Institutional Investor and has written in the past for Thomson Reuters and CNN. Follow him on Twitter @Andrew_M_Willis.

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