Canaccord: Constellation Brands Investment A 'Transformational Event' For Canopy Growth

Canopy Growth Corp CGC announced Wednesday its beverage company partner Constellation Brands, Inc. STZ is increasing its stake in the company to 38 percent. 

The Analyst

Canaccord Genuity's Matt Bottomley on Aug. 15 upgraded Canopy Growth from Hold to Speculative Buy and increased the price target for the company's Canadian stock WEED to C$50.

The Thesis

Constellation Brands will invest around $4 billion of capital in Canopy Growth, Bottomley said in the note. (See the analyst's track record here.)

The cannabis company plans to issue 140 million warrants that could result in further investment over the next three years that increases Constellation's stake to more than 50 percent, the analyst said.

Bottomley sees the investment as a "transformational event" for Canopy that allows the company to expand its platform. Canopy now has a dominant cash position in the Canadian cannabis industry, the analyst said.

"The company is substantially better suited to execute on a global first mover advantage with the capital and strategic leverage provided by Constellation."

Price Action

Canopy Growth was trading up 0.23 percent to $30.95 off the open Friday.

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