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How Hemp License Sets CGC on a Path to a Billion Dollars in Sales

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A word on value

As we discussed in the last part of this series, Canopy Growth (WEED)(CGC) recently acquired a hemp license. This license increases the fundamental value for Canopy Growth, which was evident in the 11% stock price increase on January 14.

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On a path to a billion dollars in sales

In its recent earnings call, Constellation Brands shed some light on Canopy Growth’s sales. In the next 18 months, the sales are expected to reach about one billion Canadian dollars. One billion dollars is substantial for a company that had revenues of 93 million Canadian dollars in the last 12 months.

With the hemp license, Canopy Growth has access to one of the biggest markets in the US, which sets the company on a path to eventually achieve that target of one billion Canadian dollars in sales. Canopy Growth plans to make capital investments in the amount of $100 million to $150 million, which is expected to produce “tons of hemp extract on an annual basis.” Read our full in-depth report, Canopy Growth: Notes from Constellation Brands’ Earnings, for more analysis.

An increase in sales should trickle down to the earnings growth, which could boost the stock price. Yesterday’s 11% increase in Canopy Growth captured some of that value. Peer (HMMJ) Tilray (TLRY) gained nearly 4%, and CannTrust (CNTTF) gained 3%. HEXO (HEXO) was down 2.3%.

Read about what New York can expect from Canopy Growth in the next part of this series.

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