Can Canopy Growth Become A Leader Among Cannabis Stocks?
Canada-based Canopy Growth Corp (NYSE: CGC) is the largest cannabis company in the world. It has a market cap of $6.2 billion and continues to lead the marijuana space globally. Canopy produces, distributes, and sells a wide range of cannabis and hemp-based products for both recreational and medicinal consumption.
Here we take a look at this cannabis company’s focus on increasing hemp production and if it can be a major player among hemp stocks.
Industrial hemp is a tall, leafy plant with a fibrous stalk. Hemp can be grown virtually anywhere on earth. It’s grown for thousands of end-uses including food, skincare, textiles, bioplastics, and fuel. Hemp varieties are members of the cannabis family and they contain low levels of THC (tetrahydrocannabinol), a psychoactive ingredient. Hemp is an excellent source of low-cost cannabidiol (CBD). CBD’s rise to fame is attributed to its wide range of benefits including pain relief, anxiety/depression reduction an neuroprotective properties, among others.
Canopy Growth began building its hemp supply chain in the United States through investments in hemp cultivation and manufacturing infrastructure. In December 2019, it began selling a line of hemp-derived CBD isolate products under the First & Free brand. However, in order to cut costs, Canopy Growth recently announced the closure of its hemp farming operation in New York.
Canopy Growth aims to leverage its expertise in hemp farming and CBD extraction. The company’s hemp division is uniquely positioned to take advantage of the proposed regulatory changes that allow licensed producers to collect and process CBD from hemp.
Hemp Stocks: A Long Term Play
Several marijuana companies including Canopy Growth are grappling with mounting losses. In the last quarter, Canopy reported a net loss of CA$1.3 billion or CA$3.72 per share. We can see why Canopy Growth is focused on exiting non-profitable operations to boost its bottom-line.
Hemp is a low margin product and its legal in the United States at the federal level. Marijuana companies such as Aurora Cannabis, GW Pharmaceuticals, Tilray, and CV Sciences continue to invest heavily to gain traction in the high-growth hemp space. In fact, Aurora Cannabis recently entered the US hemp market via the acquisition of hemp company Reliva.
We believe hemp production will gain significant traction once companies are able to improve profit margins and post a positive operating profit. Several hemp companies already have the required infrastructure for hemp production. They will be able to easily increase manufacturing capacity once hemp production turns profitable.
The long term profitability of hemp will not come from CBD based products, rather a more holistic approach to the plant itself. As hemp production increases, hemp companies must find ways to utilize and monetize the entire plant and develop regional hemp processing infrastructure to do so. Keep an eye out for publicly traded hemp companies that focus on the development of this infrastructure as they will become integral in the supply chain for thousands of new hemp-derived end products.
Can Canopy Growth Become A Leader Among Hemp Stocks?
About Cannin: Your Marijuana Investment Experts
Cannin is your trusted resource for information about marijuana and hemp stock investment opportunities. Our global team of experts evaluates all emerging marijuana and hemp stock investing opportunities. We aggregate hundreds of hours of research and provide tips on the best marijuana and hemp stock investments for 2020. We provide the latest marijuana investment and hemp investment news and analysis.
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