Major Leadership Shakeup Causes CGC Stock to Soar, Prospects Improve for 2020

CGC Stock Surges With New CEO

Canopy Growth Corp (NYSE:CGC) is still very much the industry standard bearer when it comes to marijuana stocks. Having said that, the company has been, much like the stock market itself, in a lot of flux lately.

But now the company has settled on a new chief executive with a clear vision for the future of the company. That’s great news for Canopy Growth stock investors.

On December 9, after Canopy named David Klein as its new CEO, CGC stock surged 14%.

Klein is a senior executive who had been with alcohol company Constellation Brands, Inc. (NYSE:STZ) for 14 years. (Source: “Canopy Growth Announces David Klein As New Chief Executive Officer,” Canopy Growth Corp, December 9, 2019.)

His work at Constellation was focused on spreading alcohol brands around the world, including the U.S., Canada, Mexico, and Europe. Naturally, this experience will come in handy as the legal marijuana industry looks to grow globally.

Now Klein is sliding into the head leadership position at the largest marijuana company on Earth by market cap.

“Thanks to the efforts of Mark [Zekulin] and the entire team at Canopy Growth, no company is better positioned to win in the emerging cannabis market, ” said Klein. (Source: Ibid.)

Zekulin, for his part, was a co-founder of Canopy Growth, and he assumed the leadership role when Bruce Linton was notoriously fired.

“It has been an incredible six years at Canopy Growth, and I have witnessed the team and Company grow from five people in an abandoned chocolate factory, to thousands of people across five continents,” said Zekulin. (Source: Ibid.)

Chart courtesy of StockCharts.com

The stock market is clearly happy with the company’s decision. It marks a huge departure for Canopy Growth as the company becomes more subsumed by Constellation Brands and changes its focus, which, in the eyes of many investors, is for the better.

Canopy Growth Looks to Cannabis-Infused Beverages

Canopy Growth Corp’s shift away from its co-founders (both Linton and Zekulin are no longer with the company in an official capacity) means that Constellation Brand’s vision has won out.

What does that vision entail? Profits.

Linton was fired, reports say, for his focus on expansion instead of profits. He wanted to create a global marijuana empire that would span the globe and be the leader in one of the most exciting emerging industries of all time.

But Constellation Brands is a “Big Alcohol” company, one that wasn’t keen on waiting two, three, or four years to see earnings growth at Canopy. Constellation wanted strong financials that it could show to investors to justify its multi-billion-dollar investment in the cannabis company.

IT was the disparity of those two visions that inevitably led to the departures of Linton and Zekulin. For some (myself included), I tend to support Linton’s vision; the legal marijuana industry is nowhere near done growing yet.

Canopy Growth stock has so much potential left within it, especially if the company can take advantage of pot-market growth around the world as legalization becomes more commonplace. Canopy was already planning for this when it invested in Acreage Holdings Inc (OTCMKTS:ACRGF, CNSX:ACRG.U).

Canopy Growth acquired Acreage Holdings for $3.4 billion, with a mandate to exercise that right when cannabis production and sale becomes federally legal in the United States. (Source: “Canopy Growth Announces Plan To Acquire Leading U.S. Multi-State Cannabis Operator, Acreage Holdings,” Canopy Growth Corp, April 18, 2019.)

“Our right to acquire Acreage secures our entrance strategy into the United States as soon as a federally-permissible pathway exists,” said Linton when announcing the deal. (Source: Ibid.)

While that plan hasn’t totally been abandoned, Constellation Brands is more interested in seeing immediate profits from the markets where cannabis is already legal.

The next phase in that plan involves cannabis-infused beverages, a product segment that has had many investors excited since Canopy and Constellation joined forces.

Canopy Growth just received a license from Health Canada that will allow it to operate a 150,000-square-foot cannabis-infused beverage facility. (Source: “Canopy Growth Receives Health Canada Licence for State-Of-The-Art Beverage Facility,” Cision, November 25, 2019.)

Marijuana in drinkable form is an interesting business concept, made all the more potent by Constellation Brand’s experience in the beverage business. Together, Constellation and Canopy could introduce unique products that generate high revenues for years to come.

With another potentially huge source of revenue on its way, surging profits and a higher CGC stock price could be on the horizon.

Analyst Take

With the marijuana industry being jam-packed with potential, it stands to reason that the leader of said industry would be exciting to investors.

And that is the case with Canopy Growth stock. The company continues to change and grow, but what remains constant is the potential for high investor gains as Canopy Growth Corp focuses on making profits, thereby growing the price of CGC stock in 2020.