a hand holding a plant: The More CGC Stock Flounders, the Less Constellation Can Handle It


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The More CGC Stock Flounders, the Less Constellation Can Handle It

As this investment story concerns a cannabis company, Canopy Growth Corp. (NYSE: CGC), I’ll do all I can to avoid puns like “cannabis stock high,” “cannabis company goes to pot,” “this weed is smoking,” “seed money” – but it won’t be easy. After all, for a certain age demographic, cannabis stocks conjure images of Cheech & Chong strolling the trading floor in crummy blue jean vests, surrounded by an entourage of admiring traders and a huge honking cloud of smoke. But here are the makings of a serious appraisal: the palpable reality of CGC stock as a growth opportunity.



a hand holding a plant: The More CGC Stock Flounders, the Less Constellation Can Handle It


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The More CGC Stock Flounders, the Less Constellation Can Handle It

Uh oh, was that another pun?

First, the reality: Cannabis stocks are fraught with uncertainty and CGC is no exception. This is definitely, definitely not to say that they’re risky or hands-off investments; more that the sector is relatively new, putting it on par with electric vehicles, space tourism and ride hailing services. We don’t have much data to leverage and can only say that right now, EVs are soaring and the likes of Uber (NYSE:UBER) and Lyft (NASDAQ:LYFT) are stumbling. Come back in a few years and it’s possible the sectors will pull up even or even swap places. There’s just not enough sector-wide share price and revenue history to meaningfully extrapolate.

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But beyond this, cannabis itself is complicated by conflicting legalities. As of January, 11 states have legalized marijuana for adults 21 and over while 33 states allow it for medical use. Yet on a national level, marijuana remains illegal and this creates a sort of double jeopardy. No matter whether your state

Canada’s largest licensed cannabis producer and its U.S. affiliate on Thursday revealed plans to launch THC-infused beverages in the U.S. market. Encouraged by recent beverage sales in Canada, Canopy Growth (NYSE:CGC) and Acreage Holdings (OTC:ACRGF) say they intend to bring similar options to U.S. consumers next summer.

Canopy Growth began shipping THC-infused beverages in Canada under the Tweed brand this spring. So far, the company has five of the top six performing products in the category there, and would like to achieve similar success in the U.S. with some help from what will eventually be its U.S. subsidiary, Acreage Holdings.

Acreage Holdings operates 27 marijuana dispensaries in the U.S. and has licenses it could use to open at least 40 more. In addition to selling Canopy Growth’s THC-infused beverages in stores operated by Acreage, the partners plan to leverage Canopy’s relationship with Constellation Brands (NYSE:STZ) to distribute them.

Canopy Growth’s efforts to market cannabis-infused beverages haven’t paid off for its shareholders yet. During its fiscal first quarter, which ended June 30, the company lost 128 million Canadian dollars and reported just CA$110 million in revenue.

Given the magnitude of those losses, North American beverage sales aren’t likely to be enough to stop the financial bleeding in the foreseeable future. Since this spring, the company has only sold 1.7 million cans of cannabis-laden soda water at around CA$4 per can. Also, at just 2 mg of THC per can, there just isn’t much for consumers to get excited about. Standard edible dosages start at 10 mg — a serving size most experienced cannabis users still consider ineffective.

This article originally appeared in the Motley Fool.

Cory Renauer has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Constellation Brands. The Motley Fool has a