The global cannabis industry is growing at a torrid rate -- and the marijuana market may become far larger than many investors currently expect.
Investment firm Cowen recently boosted its worldwide cannabis sales forecast to $75 billion by 2030, up from a previous projection of $50 billion by 2026. Bank of America is even more optimistic; its analysts believe the marijuana market could one day reach $166 billion in annual sales.
If you're looking for a way to profit from this megatrend, read on to learn more about one outstanding business that's particularly well positioned to cash in on the global cannabis boom.
Canopy Growth ( CGC -3.57% ) is the largest cannabis stock in the world by market capitalization. It has rightfully earned this designation thanks to its powerful competitive advantages and massive growth opportunities -- all of which stand to make the company even more valuable in the years ahead.
Canopy Growth has built a leading position in the Canadian adult-use recreational marijuana market. Nearly 80% of its third-quarter sales were derived from the adult-use market, driven by its wholesale supply deals with several Canadian provinces. The company is also well positioned to benefit when Canada legalizes the sale of cannabis-infused beverages and edibles later this year.
International markets represent another long-term growth opportunity for Canopy Growth. The company already has a presence in more than a dozen countries spanning five continents. These markets are still in their nascent stages, and many more countries will likely legalize marijuana in the decade ahead. Canopy Growth -- with its ample production capacity and cash-rich balance sheet -- is positioned better than perhaps any other company to capitalize on this global trend.
The rich get richer
At a time when many of its competitors need to issue debt or sell equity to fund their expansion, Canopy Growth has more than $4 billion in cash in its coffers, thanks to Constellation Brands' ( STZ 0.41% ) investments. The beer giant owns about 38% of Canopy Growth, along with warrants that give it the right to boost its stake to approximately 50% in the future. This capital gives Canopy Growth a powerful edge over its competition, as it provides it with all the money it needs to increase its production capacity, enter new markets, and make strategic acquisitions.
Constellation Brands' large equity stake also sets up the alcohol titan to potentially acquire all of Canopy Growth. Constellation would likely need to offer to purchase Canopy's shares that it does not already own at a substantial premium to where they currently trade in order to entice shareholders to approve the deal. Thus, investors who buy today could earn a hefty profit should Constellation Brands acquire Canopy outright in the future.
However, there's no need to speculate on a potential deal. Canopy Growth is a fundamentally strong business in its own right, and -- as a leader in the global cannabis industry -- it will likely deliver even greater long-term gains to investors if it remains independent.
A massive opportunity
All told, Canopy Growth is helping to meet the surging demand for products derived from cannabis across the world. With people increasingly turning to marijuana to treat an array of ailments, cannabis has the potential to disrupt industries -- such as alcohol, tobacco, and pharmaceuticals -- totaling $500 billion in sales, according to Canopy Co-CEO Bruce Linton. If this figure is even close to being accurate, Canopy Growth's current $14 billion market cap drastically understates its ultimate market opportunity -- and investors who buy its stock today should be well rewarded in the years ahead.