By Ciara Linnane, MarketWatch
Canopy Growth Corp. has an unmatched opportunity to dominate the global market for cannabis products with a war chest of more than $5 billion, a high-level management team, and a new and high-tech distribution center, according to GMP Securities.
GMP analyst Martin Landry said he came away from an investor meeting hosted by the company on Tuesday confident that it is ready for the opening of the Canadian recreational weed market, which is scheduled for Oct. 17.
U.S.-listed shares /zigman2/quotes/200603886/composite CGC -0.24% climbed 2.9% in early trade Wednesday.
“The cannabis industry is increasingly drawing talented individuals, and Canopy is at the top of the food chain,” Landry wrote in a note, reiterating his buy rating on the stock.
The company has brought in senior executives from a logistics background via Amazon.com Inc. /zigman2/quotes/210331248/composite AMZN -1.79% and Walmart Inc. /zigman2/quotes/207374728/composite WMT -1.02% , from a marketing background via Molson Coors /zigman2/quotes/205165133/composite TAP -2.14% and from a pharmaceutical background via Purdue Pharma.
“Such high-level talent should help Canopy navigate thought the rapid growth expected to come with the recreational market,” said Landry.
Canopy’s new distribution center is another positive, he said. The company spent $50 million upgrading an 80,000-square-foot industrial building beside its production facility into a center that has automated excise-tax labeling and packing lines and expects to start shipping to the Canadian provinces by mid-September.
Landry reported having toured the company’s Smiths Falls, Ontario, headquarters multiple times, observing that, for the first time, the facility “did not look like a major construction zone.”
“The phase 4 expansion is completed and licensed with plants entering the grow rooms, which should double the company’s capacity at Smiths Falls to 15 tonnes.”
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At full capacity the center will have six bottling lines capable of processing 115,000 jars during an eight-hour shift of either dried cannabis or oils and gels.
Landry has a $50 stock-price target for Canopy, which does not include a potential entry to the U.S., where cannabis is still a Schedule 1 drug at the federal level, putting it in the same category as heroin, LSD and ecstasy.
That has meant participants in the U.S. industry are unable to have bank accounts that would be subject to federal supervision and insurance. That has complicated the effort to grow the market, and handed Canada a valuable first-mover advantage.