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Thursday, October 22, 2020

CANOPY GROWTH CORP COM NPV (OTCMKTS:TWMJF) Pops on Legalization Timeline

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CANOPY GROWTH CORP COM NPV (OTCMKTS:TWMJF) is one of the central players in the Canadian cannabis cultivation sector. That space got a major boost on Monday when the CBC came out with news that Justin Trudeau’s Liberal government will announce legislation next month that will legalize marijuana in Canada by July 1, 2018. Interestingly, this is behind the schedule we expected, but it is still good news for the space because it makes the process more concrete.

We saw shares of TWMJF push about 11% higher in direct reaction to this story. Furthermore, the company has seen an influx in interest of late, with the stock’s recent average trading volume running 19% beyond its prior sustained average level.

CANOPY GROWTH CORP COM NPV (OTCMKTS:TWMJF) is one of the bigger growers. The company produces and sells medical marijuana in Canada. It offers dry cannabis and oil products primarily under the Tweed and Bedrocan brands. It also sells its products through online.

According to company materials, “Tweed is the most recognized marijuana production brand in the world. It has built a large and loyal following by focusing on quality products and meaningful customer relationships. Tweed doesn’t just sell marijuana, it facilitates a conversation about a product we’ve all heard about but haven’t met intimately yet. It is approachable and friendly, yet reliable and trusted. As marijuana laws liberalize around the world, Tweed will expand its leading Canadian position around the globe.”

Also from their materials, “Bedrocan is the epitome of medical-grade cannabis. Bedrocan BV pioneered medical cannabis in Holland through decades of selection and refinement, leading to standardized, whole bud cannabis strains that patients can rely on. Bedrocan Canada supplies the same standardized strains to the Canadian market through exclusive licensing rights to the American continents, an arrangement it will also enjoy for all future genetic advancements. Due to its consistency over time, Bedrocan’s strains have been used in clinical research in seven European countries. That commitment to research didn’t stay on the east side of the Atlantic – Bedrocan Canada recently launched one of the largest clinical cannabis studies in the world, the EQUAL Study, to evaluate quality of life before and after medical cannabis use.”

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We have long been discussing Trudeau’s promise to make marijuana legal in Canada nationwide for recreational use, so this announcement shouldn’t really come as much of a surprise. The stocks in the group all reacted strongly in Monday’s action as the news hit.

The source of the news was the CBC network, who said they learned from an anonymous government source.

According to their report, “The federal government will be in charge of making sure the country’s marijuana supply is safe and secure and Ottawa will license producers. But the provinces will have the right to decide how the marijuana is distributed and sold. Provincial governments will also have the right to set price. While Ottawa will set a minimum age of 18 to buy marijuana, the provinces will have the option of setting a higher age limit if they wish.”

The report continued to note that rules were in the works to limit households to growing just four plants each.

We would note that this is still a long ways off. In addition, companies that are simply limited to marijuana production may not end up doing quite as well over time on this news because cannabis is clearly on its way to becoming an increasingly mature commodity market.

Commodities are driven by both supply and demand, and this legislative agenda is clearly going to drive both higher. Hence, investors are encouraged to evaluate opportunities in light of not only the excitement and interest surrounding legislative expansion of the cannabis market, but also a concomitant expansion in available supply of cannabis as a cash crop, which may continue to drive pot prices lower, crimping margins of big producers over time.

At this time, carrying a capital value in the market of $1B, CANOPY GROWTH CORP has a significant war chest ($92.8M) of cash on the books, which stands against about $1.1M in total current liabilities. TWMJF is pulling in trailing 12-month revenues of $30.3M. In addition, the company is seeing major top line growth, with y/y quarterly revenues growing at 180.1%. This may be a very interesting story and we will look forward to updating it again soon. For continuing coverage on shares of $TWMJF stock, as well as our other hot stock picks, sign up for our free newsletter today and get our next hot stock pick!

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