This Is Why Canopy Growth Is the Best Pot Stock

Ever since the cannabis craze hit Wall Street back in mid-2018, I’ve been pounding on the table saying that the best marijuana stock to buy in the group is Canopy Growth (NYSE:CGC). The logic is simple: In addition to being the biggest player in the industry, CGC stock has long had one thing that no other cannabis company has — $4 billion in cash from Constellation Brands (NYSE:STZ).

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That $4 billion gives Canopy unprecedented visibility into being one of the industry’s long-term winners through early, aggressive, and large investments. As such, I have consistently reasoned that CGC stock belongs in every cannabis-related portfolio.

This bull thesis got a big boost in mid-April. Canopy struck a deal with major U.S. cannabis operator Acreage to buy that company for $3.4 billion once cannabis is legalized nationwide in the U.S.

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For those who don’t follow this industry closely, that’s a big deal. Canopy is the star player in the legal Canadian cannabis market. But the Canadian market is peanuts. The big deal here is the U.S. market. Depending on who you ask, that market is about tenfold the size of the Canadian market.

Thus, the big question for Canopy and other Canadian pot stocks is whether or not these companies can replicate their success in the U.S.

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Canopy just answered that question in emphatic fashion, and the market is reacting favorably. CGC stock popped roughly 10% on the news.

In the big picture, thanks to a $4 billion early investment from Constellation Brands, Canopy has given itself unprecedented visibility into being a long-term cannabis market leader. Right now, following the Acreage deal, that visibility is as strong as ever. Consequently, the long-term bull thesis for CGC is likewise as strong as ever.

The Acreage Acquisition Is Big News

There’s a reason CGC popped 10% in response to the company agreeing to acquire Acreage. In plain English, it positions the company to fully capitalize on the $100 billion U.S. cannabis market from the onset.

First, some context. The whole Wall Street cannabis craze has been largely centered around one thing: the nationwide legalization of cannabis in Canada in late 2018. Roughly speaking, that single catalyst turned the big four Canadian pot stocks — Canopy, Aurora (NYSE:ACB), Tilray (NASDAQ:TLRY) and Cronos (NASDAQ:CRON) — from relatively unknown companies to Wall Street household names with multi-billion dollar market caps.

But, while Canadian market legalization was the catalyst, it wasn’t the prize. The prize here is the U.S. market, which most estimates put at a $100 billion opportunity, versus $10 billion in Canada. The consensus thesis is that, with cannabis fully legal throughout Canada and hemp legal throughout the U.S., it’s only a matter of time before cannabis is fully legal across the entire U.S. The big question is whether or not Canadian cannabis giants like Canopy will be able to capitalize on the big U.S. opportunity when it comes knocking.

Canopy just answered that question. By agreeing to acquire Acreage — a major U.S. cannabis operator with dozens of dispensaries and cultivation sites across 20 states — Canopy has positioned itself to capitalize on the $100 billion U.S. cannabis market opportunity from the onset. That is, as soon as cannabis is fully legal across the U.S., Canopy will be everywhere through Acreage — and ready to dominate the U.S. market like it’s dominated the Canadian market.

That’s a big deal. Indeed, it paves the path for CGC to head materially higher in a long-term window.

Canopy Growth Stock Has Long-Term Upside

My long-term bull thesis on Canopy Growth stock is that, if this company can successfully maintain its leadership position as the cannabis industry goes global and matures, then this is a $100 billion company in the making. With more visibility than ever to U.S. market domination, that long-term bull thesis looks about as good as ever.