TL: DR

With $40 billion in revenue and a $4 billion investment, Canopy Growth is well positioned to succeed in a legal cannabis market

There is uncertainty around how much more profitable cannabis business will become now that Cannabis is legal for recreation purposes

Investors of Canopy Growth nervously await the release of ‘post-legalization’ financial results due February 14th.

The cannabis industry looks to be on the precipice of an explosion as new ‘pro-weed’ regulations are making the drug more accessible than ever.

Canada officially made Cannabis legal for recreational use, allowing companies to boost production and finally introducing marijuana into the mainstream free market. However, like any new industry, the value is highly subjective because there isn’t enough past data to accurately predict future demand. In other words, no one can say for sure that legalizing marijuana for recreational use will make it more popular in the long term. We could very well be in the middle of another FOMO induced hype cycle like Crypto mania in 2017.

Canopy Growth Corp established market dominance, but is it sustainable?

Canopy Growth Corp, a major cannabis company with $40 billion in revenue (CAD) recently saw its stock price jump from $43 to $50 (~16%) in a single week. The recent surge came after Piper Jaffray, a well-respected investment bank, raised their target price for the stock by 50% because they believe the company is well positioned to dominate the growing market for legal and medical marijuana.

Piper Jaffray is expecting the global cannabis market to be worth $250- $500 billion a year in the long term and $15-$50 billion in the nearer term.

Canopy has recently achieved three significant milestones that set it apart from its competitors. For one, the company received a legal hemp license in New York, which gives them entry in the US market. Canopy is expecting to invest $150 million in NY operations on the back of this approved license.

Secondly, Canopy has hemp specific Intellectual Property, which it acquired from Colorado-based Ebbu Inc. Lastly, Canopy recently received $4 billion from Constellation Brands, the makers of Corona and Modelo beer.

All of these milestones have been achieved with the expectation that Canopy will dominate the US and global markets on the heels of widespread marijuana legalization.

First post-legalization results

February 14th will be a significant date for Canopy. It is the date when the company will be reporting its financial results for the third quarter of its 2019 fiscal year.

These financial results are significant because they will contain 2.5 months’ worth of earnings captured after recreational cannabis was finally made legal.

Investors will be able to get a sense of how well the cannabis business is performing under as a system where everyone has access to purchase their products legally. Although it’s too early to tell, the future of the Marijuana industry (and of Canopy Growth Corp) may rest on its ability to prove that an entirely legal cannabis industry has not only opened the floodgates for businesses looking to make money, but also for consumers willing to spend it.

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