Canopy Growth (NYSE:CGC) shares aren't anywhere close to their levels in late 2018 and early 2019 as the Canadian adult-use recreational marijuana market was first launching. But investors who bought early and held on have still enjoyed tremendous returns.

The global cannabis industry is still only in its early stages. If Canopy can remain a top leader in the industry, it could be able to deliver more impressive gains in the future than it has in the past. Could Canopy Growth even be a millionaire-maker stock? 

Shadow of dollar sign on a pile of cannabis leaves

Image source: Getty Images.

Opportunities

There's no question that Canopy has plenty of growth opportunities. And they start right at home in Canada. The "Cannabis 2.0" cannabis derivatives market officially launched in December. However, the COVID-19 pandemic caused retail cannabis stores to close, presenting an obstacle for the new market.

This obstacle should only be a speed bump instead of a roadblock, though. Canopy should see its Cannabis 2.0 sales soar as the Canadian economy reopens for business. And there's one particular product category that could enable the company to expand the market to new consumers.

Canopy's cannabis-infused beverages could be game-changers. That's the opinion of Bill Newland, CEO of Constellation Brands (NYSE:STZ), Canopy's partner and biggest shareholder. It's too early to know just how successful these new products will be. However, Canopy is rolling out a wide variety of cannabis drinks and mixers that could attract consumers who haven't tried cannabis products in the past.

The opportunities are sizable outside of Canada also. Canopy is already a top player in the German medical cannabis market. It has operations in Australia and Latin America. As these medical cannabis markets reach their potential, the company is poised to grow significantly.

Canopy is also positioned relatively well in the largest market of all -- the U.S. The company has already launched hemp CBD products in the U.S. It struck a deal last year with Acreage Holdings to acquire the U.S. cannabis operator if and when permitted to do so under U.S. federal laws.

Challenges

The agreement with Acreage, though, exposes the biggest challenge for Canopy Growth. The company still can't compete in the enormously important U.S. cannabis market. Without a presence in the U.S., Canopy won't be able to grow nearly as much as investors hope it will.

Constellation spent billions of dollars for a major stake in Canopy expecting the cannabis producer would have an addressable market in the ballpark of $250 billion within the next 15 years. However, roughly $100 billion of that potential market is in the U.S.

Thirty-three states thus far have legalized marijuana for medical use, with 11 also allowing the legal use of recreational pot. There's also widespread public support for marijuana legalization at the federal level in the U.S. However, this hasn't yet translated into substantive political victories in Congress.

Another key challenge for Canopy Growth is that it remains unprofitable. New CEO David Klein has reigned in spending at the company. However, Canopy still has a long way to go to reach consistent profitability and will have to keep tapping its big cash stockpile from Constellation's investments.

Millionaire-maker?

Suppose, though, that Canopy overcomes all of its challenges in the not-too-distant future. Assume that marijuana becomes legal at the federal level within the next four years. More countries legalize medical cannabis and even recreational marijuana. Canopy becomes highly profitable as its potential market expands dramatically.

Could the marijuana stock be a millionaire-maker in this scenario? Yes, but it still wouldn't be an easy $1 million.

Let's use Constellation's estimate of a $250 billion addressable global cannabis market. And let's say that Canopy could capture close to 25% of this market. That would put the company's annual sales at more than $60 billion. If we assume a price-to-sales ratio of five, Canopy's market cap would then stand at around $300 billion. That's more than 40 times the company's current market cap.

For Canopy to be a millionaire-maker, you'd have to invest $25,000 now. And nearly everything would have to unfold perfectly for the company. Full steam ahead on legalization in the U.S. and across the world. Canopy would have to quickly become a major player in the U.S. market. Possible? Yes. Probable? I don't think so.

My view is that Canopy Growth won't be able to make an average investor a millionaire. However, I suspect that the stock does have solid growth prospects over the long run. If you're hoping for $10,000 or so to turn into $1 million, though, you'll probably have to look elsewhere.