Canopy Growth (NYSE:CGC) has been rangebound for awhile, but things are brewing in the industry that could help Canopy stock break out of its current range.
All the cannabis companies continue to make strides on the M&A front, positively impacting production volumes and overseas footprints. In particular, many of the news releases have been medical-related. After all, cannabis is viewed by many has having the largest market potential in the medical field.
So, it was not a big surprise when Novartis AG (NYSE:NVS), a large global pharmaceutical company, was one of the first to invest in growing Canadian cannabis companies after they were able to list on major U.S. stock exchanges when they took controlling interest in Tilray Inc (NASDAQ:TLRY).
Of course, the medical opportunity is massive, but Tilray competitor Canopy Growth has been aggressively pursuing a multi-pronged approach that inherently diversifies the future revenue streams. CGC’s vision for THC as an ingredient in an array of consumer products separates them from an increasingly crowded industry.
As a result of the company’s innovative thinking, CGC is expanding the total addressable market when other companies are merely operating within the confines of conventional cannabinoid products. This is a strategy that should serve it well both in the short and long-term.
Canopy stock has not been immune to the selloff in May, down almost 16 percent over the last month. However, it has faired far better than Tilray stock for example, which is down over 50 percent over the same period. It is a testament to better fundamentals and long-term prospects across multiple industries that CGC stock has weathered the correction much better than its peers.
Cannabis as an Ingredient
It bears repeating that cannabis as an ingredient in consumer products is pretty revelatory. Beyond vaping and pharmaceutical products, there has yet to be a major player truly re-imagining the future of cannabis. Enter Canopy Growth.
They are a leader if not the leader in the Canadian medical market but also recognize the huge global market opportunity in consumer products. From sleep aids to beverages (alcoholic and athletic) and other health and wellness products, Canopy appears to believe that the sky really is the limit.
Per the company, consumer products offer a $250 billion market opportunity. Just a few slices of that pie would do wonders for Canopy stock price.
Right now, there are multiple human health clinical trials and animal health trials underway. Any positive news would be a catalyst for Canopy stock. And with the acquisition of Spectrum Therapeutics, it allows CGC to expand into the supplement business that complements the existing soft-gel business exceedingly well.
The recent acquisition of This Works, takes CGC another step closer to realizing the latent potential in the wellness market.
The Works Acquisition and Canopy Stock
In late May, CGC acquired This Works for a CDN $74 million. They market themselves as a skincare and wellness company, but it is clear from their product lineup that they have a broader array of consumer products that CGC can benefit from.
It is the sleep solution products and loyal customer base that have me excited about the prospects of the two company’s integration. Right now, This Works is known for its deep sleep pillow spray, which they have sold 4.2 million of across Europe, the United Kingdom, China and the United States since launching in 2011.
Not only does CGC improve its presence in the UK, but this collaboration also sets the stage for accelerated product development for a line of skincare and sleep solution products infused with CBD.
It may be too early to say whether or not CBD has the potential to disrupt the cosmetic business, but the sleep solution industry is ripe for CGC to make its presence felt. As products start to gain traction in This Works’ existing markets, this should be a big positive for CGC.
As of this writing, Luce Emerson did not hold a position in any of the aforementioned securities.
