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Sunday, November 29, 2020

A Fresh Look at Canopy Growth Corp (OTCMKTS:TWMJF)

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Canopy Growth Corp (OTCMKTS:TWMJF) is an obvious point of focus for traders seeking well-established opportunities in the cannabis space. The stock has been a clear leader over the past 12-18 months, and continues to drive strong speculation on the back of its massive cash-laden balance sheet (over $235M) and triple-digit sales growth in recent quarters. What we would further add to that picture is the company’s aggressive moves to expand its strategic relationships.

As a case in point, the company just announced the signing of a definitive supply agreement with Sunniva Inc. (OTCQX:SNNVF). According to the release, “through the terms of this two-year agreement, Canopy Growth will purchase up to 90,000 kilograms of dried cannabis from Sunniva’s wholly-owned Canadian subsidiary, Sunniva Medical Inc., a late-stage Access to Cannabis for Medical Purposes Regulation applicant, and sister company of Natural Health Services, the sector’s largest non-Licensed Producer medical patient network with tens of thousands of active registrations in the ACMPR.”

Canopy Growth Corp (OTCMKTS:TWMJF) is one of the bigger growers in the industry. 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 welcome Sunniva to the Canopy Growth family and look forward to collaborating with their team to provide a steady and high-quality source of cannabis products for consumers,” said Mark Zekulin, President, Canopy Growth. “Through provincial distribution channels, brick and mortar locations, and our online Tweed Main Street ecommerce platform we are diversifying our ability to deliver a one-stop shopping experience to consumers and provincial bodies alike. With partners like Sunniva, we are well positioned to capture market share through robust supply channels.”

According to the company’s most recent press release, Sunniva is developing a 700,000 sq. ft. GMP-certified greenhouse facility in British Columbia which will act as the primary production facility to meet their supply goals. We would note that the company further suggests that the facility will produce cannabis products to supply the current medical market and the upcoming legalized recreational market in Canada.

“This agreement with Canopy Growth represents a significant milestone for us,” said Leith Pedersen, President, Sunniva Inc. “Providing a supply of high-quality cannabis products through Canopy Growth’s unparalleled retail and distribution channels, allows us to accelerate the execution of our business plan and distribution strategy. We plan to focus on building a sustainable and profitable business as we develop the Sunniva brand and by entering into strategic partnerships with the global industry leader Canopy Growth, we are doing just that.”

At this time, carrying a capital value in the market of $2.3B, TWMJF has a significant war chest ($238.4M) of cash on the books, which must be weighed relative to about $1.5M in total current liabilities. TWMJF is pulling in trailing 12-month revenues of $69.8M. In addition, the company is seeing major top-line growth, with y/y quarterly revenues growing at 122.5%. You can bet we will update this one again as new information comes into view. Sign-up for continuing coverage on shares of $TWMJF stock, as well as other hot stock picks, get our free newsletter today and get our next breakout pick!

Disclosure: we hold no position in $TWMJF, either long or short, and we have not been compensated for this article.

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