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Jim Cramer Discusses the Future of Canopy Growth

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Currently, the Canadian government allows the sale of cannabis only in the form of dried flowers, oil, or gel. However, this should change with the second phase of legalization, which is expected to happen next month. This shift should include Canopy Growth’s introduction of vape products in Canada.

The second phase of legalization, or Canada 2.0, is expected to legalize the sale of value-added cannabis products such as vapes, infused beverages, and edibles. So, many of the major cannabis players are investing in the development of value-added cannabis products to launch after the second phase of legalization.

Canopy to introduce vape products in December

Yesterday, Canopy Growth (WEED) (CGC) CEO Mark Zekulin told CNBC that the company is ready to launch vape products in the Canadian market in December.

In an interview with Mad Money host Jim Cramer, Zekulin stated, “We’re ready to launch vape products into Canada and the difference is this is really a regulated environment, so there are rules that will govern the products that we put to market.”

Zekulin added, “There are a lot of things, and I think the key part for us is to focus on the Canadian model … we should be looking to where there’s regulations, there’s systems in place.”

He also noted that Underwriters Laboratories would certify Canopy’s vape products.

Growing concerns over vaping devices in the US

Last week, CNBC reported the death of a person in California due to vape-related lung disease. The total number of deaths related to vaping is now at seven. The growing concerns over the usage of vaping devices appear to have prompted government agencies to take action.

On September 16, California Governor Gavin Newsom ordered the CDPH (California Department of Public Health) to develop recommendations that could restrict the availability of vaping devices to minors.

Earlier this month, Michigan banned flavored e-cigarettes and was the first state to do so, reported the Washington Post. On September 11, CNBC reported that the Trump administration might consider banning flavored e-cigarettes. For more on that issue, please read Cannabis Industry Heats Up, Trump Might Ban Vaping.

Other players

Apart from Canopy Growth, major cannabis players such as Aurora Cannabis, Cronos Group, and Aphria are also targeting Canada 2.0.

Aurora Cannabis (ACB) has partnered with PAX Labs to develop a portfolio of vape products. During its fourth-quarter earnings call, the company’s management announced that it would produce vape pens, mints, gummies, and chocolates from its Aurora Air and Polaris facilities. For more on this development, please read Cannabis 2.0: Aurora Cannabis Gears Up for Edibles Market.

Recently, Cronos Group (CRON) announced that MediPharm Labs would provide filling and packaging services for its vaporizer devices. The companies signed a two-year agreement with an option to extend.

Canopy’s YTD stock performance

Year-to-date, Canopy Growth has lost 7.3% of its stock value. Its lower-than-expected earnings for the first quarter of fiscal 2020 led to a fall in the company’s stock price. After Canopy reported its first-quarter earnings, multiple analysts lowered their price targets. For more information, please read Canopy Growth: Analysts’ Target Price and Ratings.

During the same period, the stock prices of Canopy’s peers Aurora Cannabis and Cronos Group fell 0.9% and 5.8%, respectively. Aurora’s weak fourth-quarter revenue pressured its stock price. In the second quarter, Cronos Group reported a higher-than-expected operating loss, which led to a fall in the company’s stock price.

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