Canopy Set to Jump Another 50% in the Next 3 Weeks?

The S&P 500 has seen a big rebound in the last two weeks, up 25% from the recent low made in late March.

The big rebound in stocks has given relief to investors that watched their accounts plunge in the first half of March.

The strength in the broader stock market has been great for cannabis stocks. The cannabis sector has also seen a big jump. The Alternative Harvest ETF (MJ) is up 37% since mid-March, outpacing the gains in the broader stock market.

Despite the big bounce in cannabis stocks, this still looks like a great time to buy low. Most cannabis stocks are still trading well below the 52-week high.

Today, I am going to reveal the best cannabis stock to buy right now and four reasons I expect shares to do very well in the next few years.

Canopy Growth Corp (CGC, WEED) is the largest cannabis company in the world and an early industry leader. Headquartered in Canada, Canopy has a market cap of $5 billion and operations in five continents.

Canopy shares struggled during the great coronavirus selloff of 2020, falling more than 50% from late February to its recent low in mid-March.

However, now that the S&P 500 has been recovering, Canopy has been doing the same. Canopy is up more than 50% from its recent low, regaining most of its losses from March.

Looking forward, this rebound is a good start. But I think Canopy still has plenty of upside in the next few weeks, months and years.

Here’s why.

4 Reasons Canopy is a Buy Right Now

#1 – The S&P 500 Has Rebounded 22% From the Recent Low

After one of the steepest declines ever in March, global stocks have been rebounding big. The S&P 500 is now up 22% from the recent 52-week low and it looks like the leading index has bottomed out as the tide is shifting against coronavirus. That strength in the broader stock market has been great for the cannabis sector – cannabis stocks are up big in the last few weeks. Looking forward, I expect the broader stock market to continue rebounding and that should be good for cannabis stocks.

#2 – Cannabis Sales Are Recession-Proof

Cannabis has been one of the best performing industries while the global economy has been smashed. The cannabis industry was designated as essential – allowing businesses to remain open while many other industries were ordered to shut down. That essential designation was a big win for the cannabis industry. It led to record revenue in March as cannabis consumers stocked up on supply to help manage stress.

#3 – Canopy Has $2.3 Billion in Cash

Canopy has the best financial profile in the entire global cannabis industry. After a big cash infusion from Constellation Brands (STZ) in 2018, Canopy has $2.3 billion in cash sitting on the balance sheet. This gives Canopy an enormous advantage over the competition for a few reasons. First off, it gives Canopy a bigger window to grow sales and turn a profit while not having to worry about filing for bankruptcy or tapping into new sources of capital. Secondly, it gives Canopy massive financial power to invest in future growth. Canopy will be investing billions into growth in the next few years and that should be great for sales.

#4 – Canopy Shares Are Still Oversold

Canopy shares have jumped 50% in the last two weeks as the S&P 500 rebounded from a big selloff. However, despite the nice rebound, Canopy is still on sale. Shares are trading at a 72% discount from the all-time high in October of 2018. For investors who love buying on a huge dip, this is a rare opportunity. The last time Canopy traded this low was over two years ago. This looks like a great entry point for long-term investors looking for a discount.

The Big Picture on Canopy and the Recent Selloff

Canopy shares were recently dragged lower by weakness in the broader stock market. However, this also created a great opportunity. Despite the recent bounce Canopy is trading 72% below the all-time high and at a multi-year low. This looks like a great time to add shares on a huge dip and hold for the long haul.

Michael Vodicka owns shares of Canopy Growth Corp (CGC, WEED).

About the Author

Michael Vodicka is an equity analyst with more than 20 years of experience trading and investing. His research has been featured in some of the industry’s most respected publications. He has been investing and leading investors in the cannabis sector since 2013.