WEED:CC - Canopy Growth: Buy Sell or Hold?

2024-05-14 16:50:00 ET

There are numerous reasons that investors have been considering Canopy Growth ( TSX:WEED ) on the TSX today. But perhaps the biggest reason of all has been the recent news from the United States.

Word has gotten out that the U.S. Drug Enforcement Administration (DEA) will be reclassifying cannabis . That is, as long as it gets the approval through a public hearing. Even it will take quite some time to come into effect.

But why does this matter for Canopy Growth stock?

U.S. expansion

The rescheduling of marijuana as a Schedule I narcotic is huge, and we can’t pretend that it isn’t. Right now, it’s classified with the likes of heroin. But by classifying it as a Schedule III substance, it would be put in the same class as Tylenol with codeine.

This would also improve the stigma around marijuana, and not just improve those caught holding marijuana on their person illegally. And this reduction in the stigma surrounding marijuana should help companies like Canopy Growth stock grow further.

Less stigma means more acceptance by the population. More acceptance means the approval on a state basis of marijuana use for medicinal and recreational means — something that more than half of the U.S. already approves of.

How Canopy Growth stock benefits

Canopy Growth stock and its investors have long been waiting on federal approval of marijuana. And that’s bound to happen in our lifetime. While we’re still about halfway through all states legalizing it recreationally, this has sped up in the last few years.

Canopy Growth stock is therefore looking to be the largest producer of marijuana in the largest market in the world. In fact, the U.S. cannabis market is projected to be worth over US$50 billion by 2026. This would make it the largest legal market in the world.

Through purchases of U.S. companies, Canopy Growth stock stands to see a massive increase in revenue and profitability. The company would also benefit from economies of scale and streamline operations across its entire U.S. cannabis holdings, leading to cost reductions and improved profitability.

Furthermore, Canopy Growth stock is already well known. Federal legalization would allow them to leverage their brand recognition in the U.S., potentially giving them a head start in this new market. So, while there are still hurdles to overcome, Canopy Growth stock looks like a strong contender.

Bottom line

Whether investors want to buy, sell, or hold Canopy Growth stock certainly depends on your risk portfolio. Cannabis stocks are still risky, and Canopy Growth stock is no exception.

For now, buying Canopy Growth stock could be a good idea if you’re looking to hold it for the next decade. In that time, we should see the marijuana market improve, and hopefully see the company reach profitability.

If you want to sell, though, now could be the time after a boost in share price — that is, if you need the cash. But if you don’t, I would just park it. As mentioned, the market is bound to improve. While it’s unclear when that might be, Canopy Growth stock does stand to make a killing eventually. So, if you’re a patient investor, it might be worth your while.

The post Canopy Growth: Buy, Sell, or Hold? appeared first on The Motley Fool Canada .

2024