After a late 2018 plunge, cannabis stocks have been on a tear to start 2019 due to a confluence of tailwinds, as I predicted in December. You’ve had analysts initiate coverage on the industry with a bullish skew. You’ve had early stage investors talk up the long-term potential of these companies. M&A chatter has picked up and legislation has moved in the right direction. All together, the big four pot stocks — Canopy Growth (NYSE:CGC), Tilray (NASDAQ:TLRY), Cronos (NASDAQ:CRON) and Aurora (NYSE:ACB) — are all up more than 30% in 2019 already, and it’s not even halfway through January.

This trend will persist because 2019 will mark the year that cannabis stocks enter into the U.S. market.

The 2018 Farm Bill legalized hemp across America. But, Canadian cannabis companies have had a tough time entering the U.S. market due to cross-border restrictions. Canopy has worked around the restrictions, and was recently awarded a license to process and produce hemp in the state of New York. CGC stock rose 10% in response to the news.

This is more than just a one-off catalyst. The New York State hemp license is the beginning a multi-quarter and multi-year excursion for Canopy into the multi-billion dollar U.S. CBD market. As the company embarks on this excursion, its leadership position will grow, its moat will grow, revenues will grow, profits will grow, visibility will grow and CGC stock will rise.

As such, now isn’t the time to sell CGC stock. Instead, it’s the time to double-down on the long-term bull thesis of Canopy turning into a $100 billion company one day thanks to the global proliferation of legal CBD products, and Canopy’s ability to stay at the top of this burgeoning market.

CGC: Buy the Rumor & Buy the News

For contextual purposes, let’s provide a timeline of what has transpired over the past few weeks and why CGC stock is up 60% since Dec. 20.

First, on Dec. 20, U.S. President Donald Trump signed into law the 2018 Farm Bill, which nationally legalized hemp. In response, Canopy Growth issued a press release commending the U.S. on passing this bill, and saying that Canopy is ready for a U.S. market launch. Roughly two weeks later, Canopy talked about its hemp production potential in Canada, and its desire and capacity to replicate that production in the now legal U.S. market. A few days after that press release, Canopy announced it had received a groundbreaking New York State license to do just that.

In other words, the writing has been on the wall since the Farm Bill passed that Canopy was going to enter the U.S. market. Investors sniffed out that a potential licensing deal was in the works, and bid up CGC stock 60% in anticipation of that deal.

Yet, even though this was a massive “buy the rumor” rally, you didn’t get a typical “sell the news” response. Instead, you got “buy the rumor, buy the news”, as CGC stock rose 10% in response to the New York State license news.

Why? Because the implications of this license are huge, and indeed big enough to keep bulls in control and bears on their heels.

The U.S. CBD Push Has Begun

Canopy isn’t just going to produce industrial hemp in New York, and stop there. Instead, this is just the first step of what will turn a multi-year expansion into the multi-billion dollar U.S. hemp market. Thanks to the passing of the Farm Bill, some industry insiders peg this market as measuring in at $22 billion in revenues within the next several years.

Canopy’s market cap is just $13 billion.

Thus, this company is in the very early stages of entering a market that is twice the size of the company. This opportunity comes on top of early stage growth in a Canadian cannabis market that projects to also be a $10 billion market one day.

All together, the U.S CBD push from Canopy has begun. It won’t stop anytime soon. That means big growth is in store for the company over the next several quarters. Such big growth will keep bulls in control, bears on their heels and the stock on a winning trajectory.

As such, the outlook for CGC stock to keep rallying in the near to medium term is quite favorable.

Canopy Growth Is a $100 Billion Company In The Making

The big picture behind CGC stock is that this is a company that is second-to-none in terms of size, innovation, leadership, resources, production capacity and expansion in a rapidly growing global CBD market that projects to be huge one day.

There’s plenty of reason to believe, given CBD’s medicinal and recreational applications and widespread use among younger demographics, that the global CBD market will be as big as the global alcohol and tobacco markets one day. Both of those markets are in the $700 billion to $1 trillion-plus range. Conservatively, let’s say the cannabis market maxes out around $500 billion in a decade. Let’s also say that Canopy only controls about 5% of the global market, and runs at an alcoholic beverage market average of 30% operating margins.

Back of the envelope calculations produce $25 billion revenue potential and $7.5 billion operating profit potential for CGC within a decade. Taking out 20% for taxes and throwing a market-average 16x multiple on the net profits, one can easily see how CGC stock could be worth nearly $100 billion in a decade.

That potential valuation is 10 years away. CGC stock has a market cap of just over $10 billion today. Thus, this is a potential ten-bagger over the next decade. Granted, ten years is a long time, and a lot could happen between now and then. But, a New York State hemp license is a big step in the right direction toward CGC stock realizing its $100 billion potential.

Bottom Line on CGC Stock

A New York State hemp license is big news, and a huge step toward this company maintaining its leadership position in the rapidly growing global CBD market. So long as this company keeps taking steps to defend market share, CGC stock has the potential to turn into a $100 billion company one day.

As of this writing, Luke Lango was long CGC and CRON.