Why I Own Canopy Growth
Canopy Growth was the first canna stock I purchased. This was back in 2014, when I first started investing.
I won’t go into the history of watching the stock over the last few years, I covered that in a previous post.
Canopy Growth is growing into a monster.
Right now they are spending a lot of money to get everything rolling, so they are not making a profit.
But as Bruce Linton has said, he is playing the long game. There is risk that Canopy Growth never gets their costs under control, meaning they never make a profit. The last quarter the company was re organizing some of the facilities in order to transform them into industrial scale production facilities. Short term loss but long term gain.
You can see in the chart below that Canopy Growths revenue is growing exponentially, but so is their operating expense. Basically we are hoping that once the company gets fully established they can cut the operating expense and turn over huger profits.
Lets look at planned green house expansions
Smith Falls- Hershey Facitliy 460,000 sq ft— Recent news release going to 1,000,000 sq ft This expansion is only going to cost 20 million. Many LPs on the market are trading at 35million market cap with very small grow sites in the 20k sq ft range.
Edmonton 160,000 sq ft
rTrees- Saskatchewan- 90,000 sq ft
Mettrum- 80,000 sq ft
New Brunswick- 100,000 sq ft
Bedrocan-52,000 sq ft
Vert Medical- 7,000 sq ft
Total 1,489,000 sq ft
Expanding to Other Countries
Canada has a population of 36 million, limiting the amount of money canna companies can make. I’ve been trying to invest in companies that are going global as there are much larger numbers at play.
Germany- Population 82 million. The government is also paying for medical marijuana vs Canada who does not.
Chile- Population 18 million
Brazil- Population 207 million
Australia- Population 24 million
Expanding into international markets means that even if Canada doesn’t legalize by July 2018, Canopy Growth will still make a lot of money. This diversification helps reduce the risk investing in Canopy.
Patient count is everything right now, with the only sales going to medical patients. If you don’t have patients being referred to your company it will be very difficult to make money.
Canopy Growth is using this to their advantage, they now have over 58,000 patients registered. Right now there are 167,000 patients registered with Health Canada. So about 35% of all patients.
Canopys Tweed Mainstreet is designed to allow patients access to a variety of producers. Canopy is signing up small producers that would otherwise have a hard time breaking into the market. I see this as a win-win for both companies. Canopy will get a cut of the transaction and the small producer gets access to a large patient base.
Producers signed up for Tweed Maintreet
Canada Island Garden- Based in PEI, a family run business.
AB Laboratories Owned by Invictus MD (IMH) This site has a 16,000 sqft grow site capable of 1,000 kg per year.
JWC Ltd. James E Wagner Cultivation, based in Kitchener Ont. Another family owned business.
UMB- Pheinmed– ownded by Umbral. Is still in the application stage and will sell product through mainstreet if they get to the sales license stage.
With the latest news coming out of Ontario, it looks like Tweed Mainstreet might eventually go by the wayside.
Unless other provinces allow producers to sell directly to consumers. This a bit of good news and bad, good that the government is going to be ready for July 2018. Bad that the government will take a cut of the profits.
Canopy Rivers currently has 56 million to help start up producers get up and running. Basically Canopy Rivers will provide funding and expertise in exchange for receiving revenue from the startup companies.
Don’t have much info on Canopy Rivers at this time.
Canopy Growth Stock
Right now Canopy sits around $9 with a 1.5 billion market cap. Earning about 60 Million per year at their current rate.
With all the expansion I can easily see the stock doubling in the next few years. When the international marets start to open up I belive Canopy will be there to take advantage. They want to be growing in each country not just exporting from Canada. This will create local jobs, which is great.
Canopy management has been proving they can execute their business plan, from buying Metrrum, to making deals with Snoop Dog, to expanding internationally.
I will continue to hold Canopy Growth for the long term, I may also had more to my position.
I fully expect the stock price to climb, its just a matter of time and how high it will go.