BTI - Forget Canopy Growth: 1 Cannabis Stock With Far Less Risk
2024-01-19 20:45:00 ET
When it comes to cannabis stocks, there are few that have as much attention out there as Canopy Growth ( TSX:WEED ). Canopy Growth managed to take hold of the Canadian market leading up to legalization. However, it was the company’s potential to take over United States cannabis market that proved the most intriguing.
But it didn’t turn out that way
The problem? Things didn’t turn out as planned. Canopy Growth put far too much money into research and development, hinging on U.S. legalization. That still hasn’t happened and likely won’t until all the states in the U.S. legalize the product for medicinal and recreational use.
And with the company bleeding out cash, it still has yet to achieve a profit. Shares continue to slide even lately, as Canopy Growth stock announced a US$30 million private placement of 6.99 million units at US$4.29 each. This led to a 9% slide in share price.
While the company has made moves to bring in more cash, such as the sale of BioSteel, more will need to be done. The company’s cash burn continues to peg it as an underperformer in the already difficult cannabis industry. Debt being the main culprit.
Therefore, there might be another far better option for investors. One company that has already hit a profit, and yet hasn’t taken over headlines. Yet.
Organigram
You may recognize Organigram Holdings ( TSX:OGI ) from the boom back when cannabis stocks were the big thing. Yet despite performing far better on its balance sheet, Organigram stock remains under the radar. How much better? The cannabis stock has seen shares climb 75% in the last three months alone.
While other cannabis stocks remain drowning in debt, Organigram stock has negligible debt on hand, completing around $30 million in capital expenditure projects over the last year. So not only is the stock doing well now, the company should see even more profit come in from these cost saving maneuvers.
Furthermore, the cannabis stock is a pure cannabis play. It has one of the largest indoor cannabis facilities in the world, producing over three million edibles monthly. What’s more, it has placed as either the second or third largest cannabis company in Canada by market share, behind Canopy Growth stock.
More to come
Just this week, Organigram stock also saw some great news. British American Tobacco ( NYSE:BTI ) voted in favour of a further investment into Organigram stock. The company is expected to dish out about $41 million at a share price of $3.22. Then, it plans to put out capital of about $81 million for project Jupiter.
Project Jupiter would be focused on investing in international cannabis operations, with the first $41 million for general purposes at the corporation. Ideally, the investment will take the company’s business worldwide with the cash infusion.
The thing is, shares currently trade at just $2.31 as of writing, providing a great opportunity for those seeking growth in the cannabis industry. In fact, shares could double in the next year, given the consensus price target sits at $4.54, without recent news priced in.
Bottom line
Analysts are on board with this cannabis stock, yet aren’t with many others, including Canopy Growth stock. While it has been marked as an underperformer, Organigram stock is set to outperform in the near future. Even with the recreational market remaining a challenging place.
Long term, however, analysts believe this is a sincere winner among cannabis stocks. It has strong cash on hand, growth expansion opportunities, efficiency investments, and its Jupiter investment platform. All taken together, this is one sleeping giant that likely won’t remain sleeping forever.
The post Forget Canopy Growth: 1 Cannabis Stock With Far Less Risk appeared first on The Motley Fool Canada .
Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends Organigram. The Motley Fool has a disclosure policy .
2024