Cannabis stocks, like Canopy Growth (NASDAQ:CGC) stock, are seeing higher highs.
In fact, over the last few weeks:
- Canopy Growth jumped from $13.83 to a high of $27.70.
- Aurora Cannabis (NYSE:ACB) ran from $4 to $9.41.
- Cronos Group (NASDAQ:CRON) popped from $5.25 to $8.
- Aphria (NASDAQ:APHA) ran from $4.30 to $6.84.
- ETFMG Alternative Harvest (NYSE:MJ) popped from $10.50 to $14.36.
The buzz could very well last for some time. All on speculation President-elect Joe Biden could legalize cannabis at the federal level, and as more states approve its use. With patience, I strongly believe the CGC stock could rally back to $50.
Canopy Growth Just Moved to the Nasdaq
Helping, the stock just moved from the New York Stock Exchange to the Nasdaq composite, as of Nov. 13.
“By making the move over to Nasdaq, we are joining some of the world’s leading companies that share our passion and focus for innovation,” said David Klein, Canopy Growth CEO. “Making the transition to Nasdaq also provides us with greater cost-effectiveness and access to a suite of tools and services that will help us connect more efficiently with our current and future investors.”
There’s a Good Deal of Support for Legalization
For one, Biden has already said he would, “decriminalize the use of cannabis and automatically expunge all prior cannabis use convictions,” as quoted by the Boston Globe. In addition, according to MarketWatch, Biden’s selection of Sen. Kamala Harris as his running mate is “modestly positive for cannabis, as she is an advocate for legalization.”
Plus, more states are legalizing cannabis.
For example, New Jersey, Montana and Arizona just approved amendments to legalize the use of cannabis for those above the age of 21. Voters in South Dakota approved it for medical use.
We also have to consider that the District of Columbia and 11 other states – Washington, Oregon, California, Nevada, Colorado, Michigan, Illinois, Maine, Vermont, Massachusetts and Alaska – all allow its recreational use now, too. Even better for related stocks, a Pew Research Center survey found that 67% of the U.S. supports legalization. A Gallup survey found that 66% of Americans are in favor of legalization.
Canopy Earnings Created a Lot of Buzz
The most recent earnings report from Canopy highlights a good deal of growth here. Revenues were up 77% year over year to CAD135.3 million, which beat expectations for CAD117.2 million. All thanks to an increase in recreational revenue, and strength in its vaporizer sales.
Gross margins improved 1,400bps to 19%. It also managed to increase its market share of the Canadian recreational market to 15.5%. In addition, Canopy Growth established a leadership position in the cannabis-infused beverage segment and opened another nine retail stores.
In the U.S. market, Canopy Growth launched its Martha Stewart-branded health and wellness CBD gummies, oil and soft gels, which helped generate significant media attention. Martha Stewart CBD products are also expanding into brick-and-mortar stores.
“We saw another quarter of improvement in our operating expense ratio while our marketing and R&D investments are being re-directed to drive sales,” added CFO Mike Lee. “Importantly, our end-to-end review has identified cost savings opportunities in the range of $150-$200 million across cost of goods sold, general and administrative expenses, and inventory, and efforts are underway to quickly capture value. Leveraging ongoing improvements across our business, we are accelerating our path to profitability, notably in our largest market, Canada.”
The Bottom Line With Canopy Growth
The buzz could very well last for some time for Canopy Growth. All on speculation Biden could legalize cannabis at the federal level, and as more states approve its use. That’s in addition to rapidly improving fundamentals, and growth in the U.S. and Canada.
Again, with patience, I strongly believe the CGC stock could rally back to $50.
On the date of publication, Ian Cooper did not have (either directly or indirectly) any positions in the securities mentioned in this article. Ian Cooper, a contributor to InvestorPlace.com, has been analyzing stocks and options for web-based advisories since 1999.