Buy Canopy Growth Stock Before It Surges to $60 In Canada, the cannabis market got off to a rough start in 2018 and 2019 because, quite frankly, nobody knew what they were doing. Canadian government officials didn’t know to regulate the industry. Cannabis sellers didn’t know how much product to make, or where to sell it. Buyers didn’t know where to buy the product.
It was a mess.
But, in 2020, that mess is getting cleaned up. Government officials have relaxed tight restrictions, and the number of cannabis retail store openings in Canada is booming. Producers have right-sized their supply to match demand, and are getting that supply into the right channels now. Consumers are getting more and more comfortable with the legal model, and legal sales in Canada are hitting new record highs.
In other words, Canada is finally figuring out how to turn robust demand for cannabis, into a booming market.
The rest of the world will follow that blueprint. Over the next decade, more and more countries will legalize cannabis, sales globally will boom, and the massive cannabis wave that we were all expecting back in 2018, will finally arrive in the early 2020s.
Of course, that’s great news for Canopy stock.
CGC Stock has Huge Upside Potential
Canopy Growth has enormous upside potential as the global cannabis market finally comes into its own.
Looking at the big picture here, I see five things happening with respect to Canopy Growth over the next few years:
- Rising consumer demand for alternative recreational drugs — like cannabis — coupled with supportive legislation will power huge growth in the global cannabis market over the next 5 to 10 years, leading to this market measuring $40+ billion by 2024, and potentially $60+ billion by 2030.
- Canopy Growth continues to leverage its bigger-than-peer production facilities, first-mover’s advantage, strong product line-up and even stronger partnerships to sustain leadership in this $60+ billion global cannabis market at scale. Something like 10% market share seems doable, implying $6+ billion in sales by the end of the decade.
- Economies of scale push gross margins up towards 50%, roughly where they sit in the alcoholic beverage industry today.
- Management’s commitment to cost-cutting results in continued positive operating leverage and opex rate compression to 30%. On 50% gross margins, that implies 20% operating margins, which is also consistent with the alcoholic beverage industry.
Assuming those things happen, my modeling suggests that Canopy has a visible opportunity to net $3 in earnings per share by 2030.
Based on a 20-times forward earnings multiple, that implies a 2029 price target for CGC of $60.
Bottom Line on CGC
It’s time to buy Canopy Growth stock.
The long overdue cannabis market boom will start to materialize in the early 2020s. As it does, Canopy Growth’s sales figures will head sharply higher. This topline growth acceleration will couple with disciplined expense management to spark enormous profit growth. Enormous profit growth will converge on today’s depressed CGC stock price and power huge share price gains.
So buy Canopy today. There’s huge upside potential in this name over the next few years.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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