Canopy Growth marijuana stock surges after new Constellation stake

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Canopy
Growth, the largest publicly traded marijuana company, fell
short of Wall Street’s earnings expectations on Tuesday, but news
of a new investment overshadowed the larger-than-expected
loss. 

Shares of the Canadian company surged more than 50% in early
trading Wednesday after Canopy announced Constellation Brands —
the $42 billion company behind Corona — had upped its investment
in the marijuana grower by $4 million and now owns a 38% stake.

Canopy Growth said in a
press release that the proceeds will allow it to
“strategically build and/or acquire key assets needed to
establish global scale in the nearly 30 countries pursuing a
federally permissible medical cannabis program, while also
rapidly laying the global foundation needed for new recreational
cannabis markets.”

In an
interview with Business Insider in July, Canopy Growth’s CEO,
Bruce Linton, explained he wouldn’t have chosen just any
alcohol brand to work with, but that Constellation’s
entrepreneurial spirit made it stand out despite its $42 billion
market cap.

“Part of the reason we like them isn’t just because they’re
a diversified beverage maker — meaning they do beer, wine, and
spirits — but because they’re actually entrepreneurial,” he
said. 

“Why are you having a beverage on a Friday night? It’s
about a social lubricant. I think they didn’t view themselves as
a beverage company so much as an entity that provides those
occasions with some kind of lift if you will — and that’s an easy
way to look at cannabis, not as a threat, but as an alternative
or additional.”

Constellation shares rose about 3.7% in early trading following
the announcement. 

For the first quarter of 2019 (ended June 30,2018), Canopy posted
a loss of $0.40 a share, far outpacing the $0.11 loss that was
expected. Revenue also fell short of the expected $26.33 million,
at $25.9 million.

“With our unparalleled success in Canada and Europe, Spectrum
Cannabis’ expanding global operational footprint now covering 11
countries, our active regulatory and global market development
efforts, as well as approvals to proceed with the first of many
planned clinical trials of cannabis-based medical therapies for
both humans and animals, our leadership position in international
medical cannabis markets continues to strengthen,” Bruce Linton,
Canopy’s chief executive, said in a press release.

Linton also said 36% of Canopy’s total supply was now committed
to its home country of Canada. When Canada’s government voted to
legalize marijuana throughout the country earlier this year,
Canopy’s stock surged. But in as nascent an industry as cannabis,
shares took a 5% hit on Tuesday when the province of Ontario,
home of Canada’s largest city, said it would delay the roll out
of private retail stores.

Wednesday’s gains, if materialized when markets open, could
easily take Canopy’s stock price past Wall Street’s $30 target,
as high as $37.

Canopy is up 29% this year.

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