Last year wasn’t a good year for pot stocks. The first half of 2020 hasn’t been the best, either. But the recent poor performance in the space shouldn’t keep you away from opportunities with Canopy Growth (NYSE:CGC) stock.
Why? Multiple reasons. Firstly, a strong balance sheet, courtesy of its largest investor, Constellation Brands (NYSE:STZ). The beverage giant’s backing provides enough capital to survive and thrive. Meanwhile, rivals like Aurora Cannabis (NYSE:ACB) scramble to keep the lights on.
Secondly, a solid management team. With the right leadership in the C-suite, Canopy stands the best chance among its peers.
You know and I know these strengths alone won’t move the needle. But, there’s a potential game-changer in the works for CGC stock as well. With this major catalyst in motion, positive momentum could easily reenter the stock in the coming months.
Simply put, it’s time to seize this opportunity, and buy shares as they continue to pull back.
Why Canopy Remains Primed to Seize Opportunity
It’s easy to look at the company’s recent weak earnings, and write off its near-term prospects. But, that’s a short-sighted take. Granted, the company and its peers struggle to make a buck in the Canadian cannabis market. And until larger catalysts are ready for prime time, it’s mostly a waiting game until such opportunity strikes.
Yet, compared to its more poorly capitalized rivals, Canopy may already be in the catbird’s seat. With Constellation providing more capital for its war chest, the company stands a greater shot at success than many of the other pot names out there.
I’m not just talking about Aurora. Hexo (NYSE:HEXO), Tilray (NASDAQ:TLRY) and others may be vying for the same opportunities. But, all three are in a cash crunch. Struggling to raise more capital, they’ll have a tougher time striking while the iron is hot.
What am I hinting at here? Obviously, the biggest potential needle-mover out there for CGC stock and the other pot plays. I’m talking about the potential for U.S. federal legalization.
This isn’t a “new catalyst” for this stock. Yet, after years of disappointment, this game-changer could be just around the corner.
CGC Stock and the U.S. Federal Legalization Catalyst
Pot may be legal in many U.S. states. But, on the federal level, it remains a controlled substance. This is why the Canadian pot giants, like Canopy, can’t enter the market in say, California or Colorado.
But, this fall’s U.S. elections could change that. A “super-majority” (two-thirds) of Americans support pot legalization. The current U.S. Presidential administration remains opposed. But, the Democratic party is fully in favor. And with rising odds of that party re-taking the White House, pot legalization may become a question of “when” rather than “if” pretty soon.
So, how does the specter of legalization benefit Canopy? Even with a government favorable to changing pot laws, things will take time. However, this company is already ahead of the curve, and has a means to quickly capitalize on a potential shift in its favor.
I’m talking about its tentative merger deal with Acreage Holdings (OTCMKTS:ACRGF). This deal, first struck in 2019, will be executed once pot is legal on the U.S. federal level. In other words, the company can immediately jump-start its U.S. expansion as soon as its legal.
Granted, there are no guarantees. Pot legalization is popular, but it’s not a hot button issue. Also, Democratic Presidential candidate Joe Biden still doesn’t support full-on legalization, just decriminalization.
Even so, the odds of fully legal pot keep rising. With this catalyst in motion, expect positive momentum to reenter CGC stock as we approach November’s elections.
Buy Canopy Before Shares Take Off Again
The specter of legalization may be this stock’s primary catalyst. But, it’s not the only positive factor in motion for CGC stock. As I mentioned previously, the company’s CBD business could benefit from a novel coronavirus tailwind. The company’s Cannabis 2.0 catalysts (beverages, edibles and vapes) remain in play as well.
Yet, I still get why some may be skeptical about buying Canopy at this point in time. Even as the stock remains about 60% below its 52-week high.
However, the time to buy is now. CGC stock isn’t the only way to wager on legalization and other catalysts. But, with a rock solid balance sheet and strong management, courtesy of its deep-pocketed partner, this remains the industry leader in this emerging space. And, one of the best pot stocks out there.
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA) and +1,044% in Tesla (TSLA), just to name a few. Click here to see what Matt has up his sleeve now. Matt does not directly own the aforementioned securities.