The marijuana industry is blistering right now. With recreational cannabis becoming legal in Canada on October 17, 2018, the marijuana industry is going to get even hotter and continue to grow. That is why so many investors are anxious about cannabis investing.
The marijuana sector is still in its infancy, it is also overcrowded, and many weed stocks are overvalued. So what are the best marijuana stocks for retirement?
While there are a lot of marijuana stocks to look at, few, from this vantage point, would be thought of as long-term marijuana stocks you should hold forever. But there is one marijuana stock you should put on your radar: Canopy Growth Corp (NYSE:CGC).
Should Marijuana Stocks Be in Investors’ Retirement Portfolio?
Should investors make room in their retirement portfolio for marijuana stocks? It’s tough to argue against it. Some will argue that marijuana stocks are not profitable and still have a lot to prove before investors should put them in their retirement fund.
All true, but should investors wait years for an industry, which isn’t going away, to mature? Some absolutely will wait. But for many investors, the projected numbers are too big to ignore.
The fact is, the marijuana industry is going to be massive. By 2025, the recreational marijuana market is expected to be worth $146.4 billion with a compound annual growth rate (CAGR) of 34.6%. Over the next 13 years, the legal pot industry is projected to grow at a CAGR of 19.75%. (Source: “Legal Marijuana Market Worth $146.4 Billion by 2025,” Cision, April 30, 2018.)
In less than a decade, the legal marijuana industry will be bigger than the giant tobacco and soda industries. Is that the kind of industry investors are going to sit back and watch grow?
That doesn’t mean marijuana stocks should be in your portfolio, but it does mean that investors need to look at stocks that will add value to their retirement portfolio. And it makes no sense to ignore marijuana stocks.
Come October 17, 2018, Canada will open the door to a massive, multi-billion-dollar market.
But Canada will not keep the industry growing long-term.
Germany, the largest economy in Europe, with twice the population of Canada, is leaning toward legalizing recreational marijuana. Should this happen, Germany would become the largest legal pot market in the world.
That is, until the U.S. eventually legalizes recreational marijuana use. Right now, 30 U.S. states have legalized medical marijuana. Recreational cannabis is legal in nine states: Alaska, California, Colorado, Maine, Massachusetts, Nevada, Oregon, Vermont, and Washington. It’s only a matter of time until recreational marijuana is legal in the U.S.
As such, there is a huge, untapped potential for legal marijuana. And it explains why so many Canadian marijuana companies are expanding outside their borders.
It also explains why the best long-term marijuana stocks are Canadian. Medical marijuana has been legal in Canada since 2001. This has allowed marijuana companies to develop their infrastructure, sales channels, and partnerships.
This made it easy for Canadian pot companies to be publicly listed in Canada, and for a number of the larger players to get listed on the New York Stock Exchange (NYSE) and Nasdaq.
For those not familiar with the Toronto Stock Exchange (TSE), it is the ninth-largest stock exchange in market capitalization ($2.3 trillion). Where the Nasdaq is known for being tech-heavy, the TSE is the place to go for mining and agriculture. In 2017, 59% of all global mining financing was done on the TSE.
For investors interested in marijuana stocks, the TSE is the place to look.
The Best Marijuana Stock for Investors’ Retirement Portfolio
Because medical marijuana has been legal in Canada since 2001, it has allowed Canadian marijuana stocks to mature and prepare for the inevitability of legal marijuana. That day is just around the corner, and while a number of Canadian marijuana stocks are poised to take advantage of the recreational marijuana industry, Canopy Growth Corp could be the best cannabis stock to retire on.
About Canopy Growth Corp
Canopy Growth is a diversified, world-leading cannabis and hemp company that offers over 100 different products and cannabis varieties in dried, oil, and softgel capsule.
Canopy Growth has 10 cannabis production sites with over 2.4 million square feet of production capacity, including over 500,000 square feet of GMP-certified production space. The company also has operations in eight countries across five continents.
Canopy Growth has established partnerships with sector-leading names including Snoop Dogg and breeding legends DNA Genetics and Green House Seed Company.
In August, Canopy announced a multi-billion-dollar deal with Constellation Brands, Inc. (NYSE:STZ), the name behind the “Corona” and “Modelo” beer brands, to build or acquire key assets in nearly 30 countries. (Source: “Constellation Brands to Invest $5 Billion CAD ($4 Billion USD) in Canopy Growth to Establish Transformative Global Position and Alignment,” Canopy Growth Corporation, August 15, 2018.)
In the first quarter of fiscal 2019, ended June 30, 2018, Canopy Growth harvested approximately 10,000 kilograms of marijuana and has more than 19,720 kilograms of dry cannabis, around 14,900 liters of cannabis oil, and 1,055 kilograms of softgel capsules in its inventory. (Source: “Canopy Growth Corporation Reports First Quarter Fiscal 2019 Financial Results,” Canopy Growth Corp, August 14, 2018.)
Canopy Growth Corp Financials
On August 14, 2018, Canopy Growth announced its financial results for the first quarter of fiscal 2019, ended June 30, 2018. All figures are in Canadian dollars.
Total first-quarter revenue was $25.9 million, representing a 63% increase over the quarter ended June 30, 2017, when revenue totaled $15.9 million. It was also a 14% increase over revenues of $22.8 million in the fourth quarter of fiscal 2018.
That increased revenue growth was a result, in part, of a higher average selling price. The average selling price per gram was $8.94 for the first quarter, compared to $7.96 in the same prior-year period and $8.43 in the fourth quarter of fiscal 2018.
To company has been further preparing itself for the legalization of recreational marijuana. This has resulted in Canopy Growth Corp burning through a large amount of money, resulting in a first-quarter loss of $90.8 million, or $0.40 per share.
Canopy’s cash position remains healthy. The company ended the first quarter with cash and cash equivalents of $658.0 million, more than double the $323.0 million it reported on hand at the end of the fourth quarter of fiscal 2018. This total didn’t include the more-than-$4.0-billion it received from the Constellation deal.
During the first quarter, Canopy acquired Annabis Medical, a medical marijuana distributor in the Czech Republic. It also acquired Daddy Cann Lesotho PTY Ltd, which supplies medical cannabis in Lesotho with the potential for South Africa.
The company also increased its production capacity in Ontario, Quebec, and British Columbia. It also announced plans to roll out its Tweed Inc. retail stores and lined up a number of supply agreements with provinces for the recreational pot market.
To date, Canopy Growth Corp has multi-year annual supply agreements to deliver more than 67,000 kilograms or 36% of the total supply committed to Canadian provinces and territories.
Subsequent to the End of the First Quarter
In August, Constellation Brands announced it will invest $5.0 billion in Canopy Growth. Management has said that in the coming years, Canopy’s competition will come from big-pharma and packaged beverages, rather than other Canadian cannabis companies.
The company said it will use the influx of cash to stave off the competition eyeing the marijuana industry. (Source: “Canopy Growth Corporation Reports First Quarter Fiscal 2019 Financial Results,” Canopy Growth Corp, last accessed September 18, 2018.)
Canopy also said its wholly-owned subsidiary Tweed, was selected as an approved supplier by the Ontario Cannabis Store to supply a wide variety of cannabis products through its online store starting October 17, 2018. In total, Tweed has successfully listed over 100 cannabis stock-keeping units (SKUs) across multiple formats.
Canopy also announced it entered into a multi-year supply and service agreement with CENTRIC HEALTH Corp (OTCMKTS:CHHHF, TSE:CHH) for medical marijuana. It also closed on the previously announced acquisition of Hiku Brands Company (CNSX:HIKU, OTCMKTS:DJACF).
Canopy Growth Corp Stock Forecast
Canopy Growth is a large company with a market cap of $11.86 billion. Usually, when you buy a large stock, the growth trajectory tends to be slower. That hasn’t been the case with Canopy Growth stock.
Its share price, like the broader industry, has been on a tear, up 660% since the start of 2017. The company’s share price has also advanced 115% since the start of 2018, having seemingly shrugged off the industry-wide downturn that hit the markets earlier in the year.
That doesn’t mean investors should expect marijuana stocks to continue this blistering tear. In fact, the industry will most certainly experience major price swings. But Canopy Growth has what the others don’t; it has a strong foothold in a burgeoning industry, it has a strong potential for gains, and it is less prone to massive swings.
Chart courtesy of StockCharts.com
While buy-and-hold investors don’t usually pay attention to white noise like short-term technicals, for those investors only starting to consider Canopy Growth Corp stock, the company’s outlook remains bullish.
Canopy’s share price has broken above a tested resistance level near $35.00 per share and is mirroring a pattern from December 2017, when it jumped more than 130%. Since August, Canopy’s share price has increased more than 90%.
Canopy’s share price continues to trade well above its 50-day and 200-day moving average with a strong upward trend. Like the broader marijuana industry, volume has increased since the middle of August. Unlike many other marijuana stocks though, the increased interest in Canopy is justified.
Momentum indicators like moving average convergence/divergence (MACD) indicator and relative strength indicator (RSI) remain in buyer territory and suggest ongoing bullish sentiment.
Canopy Growth’s share price has seen eyewatering gains over a short period of time. And short-term gains of that magnitude cannot be sustained. That said, Canopy’s share price will probably give up short-term ground to profit taking, before consolidating and making another run for it in the last three months of the year.
In 2019, Canopy Growth’s share price should remain bullish and reward short- and long-term investors as it continues to dominate a burgeoning market that will only get bigger.
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