Canopy Growth Corp (WEED)

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Why Constellation Brands Remains Bullish on Canopy Growth



https://www.fool.com/investing/2022/10/20/why-constellation-brands-remains-bullish-on-canopy/

Why Constellation Brands remains optimistic
Rather than selling the troubled investment in the cannabis company, which continues to incur losses, Constellation Brands remains committed to the Canadian pot producer. On Constellation's latest earnings call, Chief Executive Officer Bill Newlands said that, "While the impairment of our Canopy investment is clearly disappointing, it is not indicative of a significant long-term market opportunity that still exists for the legal cannabis market."

Newlands specifically pointed to Canopy Growth's pending deals to acquire U.S. companies, including multistate operator Acreage Holdings and edibles maker Wana Brands, stating that the business is "positioning [itself] to have the right brands that will matter over the long run here in the U.S." He also said that "the companies that Canopy invested in to establish its U.S. ecosystem continued to perform strongly and to scale."

Acreage Holdings reported revenue of $61.4 million in the second quarter, a 39% increase from the same period a year earlier. However, the company incurred a net loss of $10.6 million compared with a net loss of $3.3 million in the year-ago period. Wana Brands is a private company, so its financials aren't public. Canopy Growth can't include the results of these and other U.S. companies it plans to invest in because it can't close on these acquisitions until marijuana is federally permitted in the U.S., so it can be challenging for investors to get a view of what the full business would look like today on a pro forma basis.

A big reason Constellation remains bullish is simply due to the potential for the industry as a whole. Cannabis is one of the most promising places to invest in today. Analysts from Fortune Business Insights project that the global cannabis market will grow at a compounded annual rate of 32% until 2028, and by then it will be worth almost $198 billion compared with $28 billion in 2021.