The global cannabis industry is growing at a
torrid rate -- and the marijuana market may become far larger than
many investors currently expect.
Investment firm Cowen recently
boosted its worldwide cannabis sales forecast to $75 billion by 2030, up
from a previous projection of $50 billion by 2026. Bank of
America is even more optimistic; its analysts believe the
marijuana market could one day reach $166 billion in annual
If you're looking for a way to profit from this
megatrend, read on to learn more about one outstanding business
that's particularly well positioned to cash in on the global
Image source: Getty Images.
Canopy Growth (NYSE:
CGC) is the largest cannabis stock in the world by market
capitalization. It has rightfully earned this designation thanks to
its powerful competitive advantages and massive growth
opportunities -- all of which stand to make the company even more
valuable in the years ahead.
Canopy Growth has built a leading position in the
Canadian adult-use recreational marijuana market. Nearly 80% of its
third-quarter sales were derived from the adult-use market, driven
by its wholesale supply deals with several Canadian provinces. The
company is also well positioned to benefit when Canada legalizes
the sale of cannabis-infused beverages
and edibles later this year.
International markets represent another long-term
growth opportunity for Canopy Growth. The company already has a
presence in more than a dozen countries spanning five continents.
These markets are still in their nascent stages, and many more
countries will likely legalize marijuana in the decade ahead.
Canopy Growth -- with its ample production capacity and cash-rich
balance sheet -- is positioned better than perhaps any other
company to capitalize on this global trend.
At a time when many of its competitors need to
issue debt or sell equity to fund their expansion, Canopy Growth
has more than $4 billion in cash in its coffers, thanks to
Constellation Brands' (NYSE: STZ)
investments. The beer
giant owns about 38% of Canopy Growth, along with warrants that
give it the right to boost its stake to approximately 50% in the
future. This capital gives Canopy Growth a powerful edge over its
competition, as it provides it with all the money it needs to
increase its production capacity, enter new markets, and
Constellation Brands' large equity stake also
sets up the alcohol titan to potentially acquire all of Canopy
Growth. Constellation would likely need to offer to purchase
Canopy's shares that it does not already own at a substantial
premium to where they currently trade in order to entice
shareholders to approve the deal. Thus, investors who buy today
could earn a hefty profit should Constellation Brands acquire
Canopy outright in the future.
However, there's no need to speculate on a
potential deal. Canopy Growth is a fundamentally strong business in
its own right, and -- as a leader in the global cannabis industry
-- it will likely deliver even greater long-term gains to investors
if it remains independent.
All told, Canopy Growth is helping to meet the
surging demand for products derived from cannabis across the world.
With people increasingly turning to marijuana to treat an array of
ailments, cannabis has the potential to disrupt industries -- such
as alcohol, tobacco, and pharmaceuticals -- totaling $500 billion
in sales, according to Canopy Co-CEO Bruce Linton. If this figure
is even close to being accurate, Canopy Growth's current $14
billion market cap drastically understates its ultimate market
opportunity -- and investors who buy its stock today should be well
rewarded in the years ahead.
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Joe Tenebruso has no
position in any of the stocks mentioned. The Motley Fool recommends
Constellation Brands. The Motley Fool has a disclosure