CGC Stock’s Fortunes Could Mean Big Gains for Other Pot Stocks in 2020

Canopy Growth Stock on the Rise

When it comes to the marijuana stock market, one stock has typically been the bellwether: Canopy Growth Corp (NYSE:CGC).

The largest marijuana stock by valuation, the performance of CGC stock typically indicates whether the market is trending up or down. It’s often among the first pot stocks to see big gains on a rise and among the first to take a hit on a dip.

Right now, Canopy Growth stock is on fire.

In 2019, CGC stock was volatile, mirroring the market. In 2020, it has only been going in one direction: up. It has gained over 12% year-to-date.

Other than experiencing a hiccup that resulted from the company delaying its much-anticipated cannabis-infused beverages, Canopy Growth stock has been a winner so far in 2020.

Chart courtesy of StockCharts.com

As you can see in the above chart, CGC stock had a pretty strong start to this year, jumping nearly 20% before the beverage news came in. Since then, however, investors have shown renewed interest in this stock, pushing it higher.

Bank of Montreal (NYSE:BMO) cannabis industry analyst Tamy Chen said the following about Canopy Growth stock:

Following the stock’s notable sell-off last year driven by a sub-optimal product mix (gel caps) and industry-wide challenges, we believe there is potential upside to Street expectations for FQ3/20 driven by the company’s pivot into a recreational product mix that should now be better aligned with demand.

(Source: “CGC Stock Gains Following BMO Target Price Upgrade,” Pot Stock News, January 29, 2020.)

BMO then raised CGC’s rating from “hold” to “buy.”

While this is great news for Canopy Growth stock specifically, more broadly it hints that we’re likely to see gains for many marijuana stocks.

The thing to remember is that CGC stock’s gains have preceded some of the largest rushes we’ve seen in the marijuana stock market.

Back when Canopy Growth Corp first scored a major investment from Constellation Brands, Inc. (NYSE:STZ)—which in turn led to the company promising that cannabis-infused beverages would be a big part of its business plan—the entire pot industry was juiced by the announcement.

Then, when Constellation Brands invested in Canopy Growth again in 2018, there was a similar effect, with nearly every pot stock surging.

In both instances, the investment wasn’t just good news for Canopy Growth; it served to validate the entire cannabis industry.

Canopy Growth stock jumped to the front of the pack and has remained there for years, despite other companies’ attempts to remove it as the most highly valued pot stock.

As mentioned earlier, 2020 has gotten off to a strong start concerning marijuana stocks, and it looks like that momentum will hold for the time being. Investors can continue to look at CGC stock’s fortunes as a pretty solid predictor of where the overall pot stock market is going.

Why Marijuana Stocks Should Continue to Surge in 2020

There are a number of reasons why the marijuana stock market started the year off strong, but I’m going to focus on only one of the main factors: accessibility.

In 2019, we saw the first full year of Canadian marijuana legalization. And with that, we got a first taste of this multi-billion-dollar industry’s potential.

But here’s the thing: we’re still very much in the adolescent phase of the legal marijuana sector. And, as with all teenagers, we’re going to see some growing pains and awkward stages of maturation.

One such awkward problem has to do with the ease of access to legal marijuana in Canada.

Across that nation, legal brick-and-mortar stores were set to enter cities and make buying weed not all that different from buying alcohol. The thing is, the rollout wasn’t nearly as smooth as planned.

The province of Ontario, for instance, had a number of problems going into legalization, the biggest of which was a change in government.

The largest and richest province in Canada held elections the summer before pot legalization. That election brought in a new party that went on to radically alter the province’s planned marijuana retail system from being a state-run monopoly  to one with private-sector companies.

Which is to say that, originally, every marijuana storefront in Ontario was going to be government-owned and operated (at least at first), but the new provincial administration came in and poo-pooed that idea, leading to a whole new model.

While the private-sector system is better in the long run for pot stocks, the policy change delayed the rollout of legal storefronts by several months. Even then, only a handful of legal storefronts were opened at first.

Compare the number of legal marijuana stores in Ontario to, say, Alberta, a far smaller province population-wise, and you begin to see that the disparity was going to hurt sales.

Per capita, Ontario had one of the lowest storefront-to-people ratios in the entire country. Naturally, that hurt revenue and stock prices.

But we’re seeing that change in 2020.

More and more storefronts are set to be open in Ontario. On top of that, Canada legalized marijuana edibles and other marijuana-infused products in October 2019, meaning that more products are going to be available at more accessible locations.

This will go a long way toward helping sales and revenue, which should lead to gains on the pot stock market.

Marijuana Beverages

One of the most hotly anticipated marijuana products that’s going to be gracing store shelves is cannabis-infused beverages.

Many view cannabis-infused drinks as a game-changing product. That’s because it gets rid of one of the biggest inconveniences about marijuana: typically, it needs to be smoked.

Many people have a negative opinion about smoking weed, due to decades of the tobacco industry sending scores of people to the hospital. Fair enough. Now, however, there will be a drinkable product that won’t scare off nearly as many first-time marijuana consumers.

Beyond that, there’s the chance to combine cannabis with alcoholic beverages (one of the main reasons Constellation Brands invested in Canopy Growth). Whether with cannabidiol (CBD) (which doesn’t get people high) or other strains of marijuana, ultimately cannabis-infused beverages could be a huge winner for marijuana stocks.

Canopy Growth Corp, as mentioned above, was set to be a pioneer on this front, but wasn’t able to meet its proposed dates for a cannabis-infused beverage release.

Canopy Growth said its work to scale up to commercial production of its cannabis-infused drinks was not complete, and therefore their release had to be delayed. (Source: “Canopy Growth delaying launch of cannabis-infused beverages,” Global News, January 17, 2020.)

The company obtained the license for its cannabis-infused beverage facility from Health Canada in November 2019, so once production is in order, it will be ready to start selling. Initially planning for January 2020, Canopy Growth now doesn’t know when its cannabis-infused drinks will hit store shelves.

“In order to deliver products that meet our customer’s high standards we are electing to revise the launch date while we work through the final details,”  said chief executive David Klein. (Source: Ibid.)

What is certain, however, is that the company is close to releasing its drink to consumers. And when it does, we can expect to see its share price rise. And, as mentioned earlier, usually what’s good for Canopy Growth stock is good for pot stocks all around.

Investors will be looking at other companies that have the potential to release exciting and new cannabis-infused products. This is a fantastic opportunity to see profits from marijuana stocks in 2020.

Analyst Take

As stated earlier, the future of the marijuana stock market is often foretold in the performance of CGC stock. We’ve seen the industry standard-bearer predict both highs and lows in the past, and right now the company is telling us to expect share-price increases.

With many pot stocks gaining in 2020 so far, and with momentum building on nearly all fronts, investors ought to be very excited about the marijuana industry.

Politically and socially, we’re seeing the marijuana sector make huge gains. But all that would be for naught if nobody wanted to buy what the pot companies are selling. Fortunately for them (and investors), a new range of products will be hitting store shelves in 2020. That should help boost sales and juice share prices.