Is Canopy Growth (TSX:WEED) a cannabis stock to buy and hold?

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Is Canopy Growth (TSX:WEED) a cannabis stock to buy and hold?

Canopy Growth Corporation
Image source: © 2021 Kalkine Media Inc.

Highlights

  • At market open, Canopy Growth's (TSX:WEED) shares jumped five per cent and traded at C$ 17.39 per share.
  • Canopy Growth is looking to acquire Wana Brands, one of the leading producers of edible cannabis products. 
  • Canopy Growth could expand its presence in the US markets if it acquires Wana Brands.

Stocks of Canopy Growth Corporation (TSX:WEED) rose at market open on Thursday, October 14, after the company announced plans to acquire Wana Brands, one of the leading makers of edible cannabis products in North America. 


Canopy Growth's shares jumped five per cent and were trading at C$ 17.39 per share. The Smiths Falls-based company has said that it is willing to acquire call options by offering an upfront cash payment of US$ 297.5 million to acquire Wana Brands.

Wana Brands comprises three entities- Wana Welllness LLC, Mountain High Products LLC, and The Cima Group LLC. 

Also Read: Will Tilray (TLRY) become the next big cannabis stock in North America?

 

It is expected that the US could make cannabis federally legal, and if this happens, Canopy could exercise those options. In addition, the cannabis producer will also pay in cash, stock, or both for 15 per cent of the fair market value of each entity. 

What could be Canopy Growth's (TSX:WEED) benefit from the deal? 

Canopy Growth could expand its presence in the US markets if it acquires Wana Brands. The Colorado-based company is a leading brand in North America, and its makes cannabis-induced gummies which are quite popular in Canada. 

Wana Brands looks to expand in nine more American states by the end of 2022, and it already has a presence in 12 US states. 

Canopy Growth Corporation Stock

© 2021 Kalkine Media Inc.

According to a Data Bridge Market Research report, the CBD Edibles Market is expected to register a compound annual growth rate (CAGR) of 24.3 per cent between 2020 to 2027, and it could value at US$ 5160 million.

Bottom line

In the first quarter of fiscal 2022, Canopy Growth achieved 23 per cent year-over-year (YoY) revenue growth. Meanwhile, the gross margin percentage increased by 20 per cent YoY. 

Notably, the cannabis producer saw a massive increase in its net income by 404 per cent to C$ 390 million. 

Also Read: 5 best TSX Cannabis stocks under C$25 to buy

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