Here's what canopy growth has to say about its future – The Motley Fool


Cover growth (NYSE: CGC) It is the largest marijuana stock in Canada in terms of revenue, but its future will depend much less on legal marijuana sales in Canada than sales in the United States. This major pot supplier has already announced its intention to create an industrial hemp park in the state of New York to implant a footprint on the world's largest marijuana market. She announced Thursday the acquisition of AgriNextUSA, an American real estate company specializing in hemp. This is what Canopy Growth says about its plan to take advantage of potential legalization in the United States.

Reverse regulations

Marijuana remains a controlled substance in Schedule 1 in the United States, so it remains illegal at the federal level. However, 33 states have enacted laws establishing some form of marijuana markets, including 10 states that have established adult entertainment markets.

A marijuana leaf on a table.


Generalized legalization in the United States is accelerating. According to Gallup, 2 out of 3 Americans support the lifting of the ban on marijuana in federal institutions, including 75% of Democrats and 53% of Republicans. Improving voter attitudes toward marijuana will likely result in the creation of more states creating markets for recreational use, particularly in New Jersey. It also makes legalization a fundamental policy of US presidential candidates.

If Congress finally legalized marijuana at the national level, it would be a boon for publicly traded cannabis companies, including Canopy Growth. Until recently, Canopy Growth and its peers have been prevented from targeting the United States because of the major listing requirements that prevent shares from engaging in business activities prohibited by federal law. In December, the US Farm Bill removed hemp, a non-psychoactive form of cannabis sativa, from the list of controlled substances, creating a way for states to create regulated hemp markets that Canadian cannabis companies can participate in. .

Eyes on the jackpot

According to the United Nations, the global market for marijuana is estimated at $ 150 billion a year, of which $ 50 billion is spent by the United States.

Most of the US market, however, is in the shadows – billions of dollars a year in marijuana sales are shifting to legal and regulated markets since Colorado became the first state in the United States to open an adult-only market in 2014. Today, today. , legal marijuana sales total about $ 8.4 billion a year, according to Matt Karnes of GreenWave Advisors, including $ 4.4 billion in sales for recreational purposes.

The change in hemp regulation does not mean that Canopy Growth will be able to sell marijuana in the United States, but it gives the company the opportunity to create an infrastructure to develop and market hemp products. This infrastructure could possibly be exploited for marijuana if marijuana also gets a sign of federal approval.

A man looks through binoculars sitting at a table.


Aware of the opportunity associated with hemp, Canopy Growth announced in January that it had received a license from the State of New York to create a hemp-based industrial park. Canopy Growth plans to spend between $ 100 million and $ 150 million on a site announced soon, which will eventually allow it to process hemp and develop hemp products, including products containing cannabidiol, or CBD, a related chemical. to health benefits. this occurs naturally in hemp and marijuana. CBD products are widely available in the United States, but all but three of the three states allow its use as a drug.

The US CBD market is valued at approximately $ 600 million. It could become a more than $ 1 billion market if regulators cooperate and retailers start selling the products. Today, CBD products are generally only available in smaller health food stores or main stores or through prescriptions issued by medical marijuana dispensaries.

Bruce Linton, CEO of Canopy Growth, is excited about the opportunity to use hemp as a gateway to national legalization of potential marijuana. In announcing the acquisition of AgriNextUSA, Linton said: "The United States is the next step on the path that Canopy Growth wants to become a leading company generating revenue. revenue, focused on all aspects of cannabinoids and their potential. "

The CEO of AgriNextUSA is Geoff Whaling, a pioneer in hemp defense who chairs the National Hemp Association. His goal is to create hemp-based parks like the one Canopy Growth plans in New York. The whale and AgriNextUSA will "accelerate the growth of forest cover" [CGC]The entry of the company into the main US jurisdictions while regulations relating to the full use of hemp as a crop began to be applied, "according to the company.

The future hemp industrial parks they plan to create will allow hemp to be "accelerated in a production cycle that would lead to commercial applications for all parts of the plant, from root to tip," thus offering farmers a one-stop shop that can serve as a "unique regional destination for their hemp crops" that "puts them in touch with researchers, entrepreneurs and innovators whose ideas will transform their cultures into new products and industries".

Canopy Growth believes that the hemp and hemp products markets could disrupt several industries, including cosmetics, textiles, food and health. If this is the case, Canopy Growth could become increasingly dependent on the United States for growth in its sales.


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