In the constantly fluctuating weed stock space, it’s hard to know at any given moment which is the best stock for your portfolio. An industry leader one moment can be left in the dust by an upstart with big backers the next. The names you’ve likely heard, Canopy Growth and Aurora Cannabis are both great companies with good track records, but if you had to choose one, which is the better buy? Let’s do a deeper dive to decipher which way weed investors should go.
Canopy Growth has for some time been the leader in the Canadian cannabis market, both on the medical marijuana side and also for its positioning in the coming of the recreational market. The company strengthened its early position by aggressively buying up smaller companies when their valuations, were still low enough to now be considered cheap.
The genius move gave Canopy Growth the ability to scale quickly and helped them develop a strong and already well-known brand throughout the medical marijuana market expansion in Canada, and the company has continued to develop worldwide markets; with established presence in Europe, Australia, and South America, making many investors more comfortable that this company has room to grow.
Those believing that weed has a ways to go in terms of stock prices are betting on the recreational consumables market. Canopy Growth shines in that area as the first company that has entered into partnership with an international beverage company, selling a 9.9% stake of the company to U.S.-based Constellation Brands, a global company and notably the owner of Corona beer.
Constellation Brands gave the company a vote of confidence in August when it increased its investment by $5 billion, giving Constellation a 38% position in Canopy Growth. This was purportedly due to a growing belief by industry insiders in the new cannabis-infused beverage market in Canada, as well as in other nations when global regulations catch up with that country.
This change was a boon for Canopy’s stock price as it pushed hesitant institutional (read: big fish) to invest. As a result, the stock has rallied from a previously sluggish period. The stock trades around $66 per share, up more than 100% since mid-August.
Aurora Cannabis (TSX: ACB)
While Aurora Cannabis endured volatility in 2018, with the stock falling from an early year high of $15 to a low of $5.34 by the end of summer, Canopy Growth’s Constellation Brands deal was a boon to the entire sector. Aurora Cannabis’ stock rallied on the announcement.
That rally has held steady, and was strengthened by unconfirmed reports that the company was in negotiations with Coca-Cola for a Cannabis infused drink deal. While the stock was halted pending news, it was announced that there was no official agreement. Investors smelling blood in the water are nonetheless continuing to push the stock higher.
Such an agreement with a major beverage company would serve to bring Aurora Cannabis back as a fierce competitor on the recreational side, where many investors had previously viewed it as being a lagging company, outpaced by Canopy Growth and HEXO. The latter company recently announced an agreement with Molson Coors Canada had been reached, making it another attractive option to take advantage of upcoming regulatory change in the recreational space.
Nonetheless, Aurora Cannabis’ takeovers of CanniMed and MedReleaf this year in large-scale deals in the $3.5 billion region have placed Aurora Cannabis at the top of the medical marijuana companies, and have also given the company the much needed scale to be in the ring with
Which do we choose?
Pot stocks have seen the kind of overheating that many remember from other bubbles. However, Canopy Growth and Aurora Cannabis are positioned to succeed.
Canopy Growth may be the stronger pick between the two weed stocks for the moment, given that there is a possibility Constellation Brands could take a majority stake among shareholders.