Pot Stock vs Alcohol Stock – Pot Wins
Canopy Growth (CGC) Flies High
The chart above tells it all. Shares of Canadian marijuana producer, Canopy Growth (CGC), were flying high on Wednesday. This was due in large part to the company’s (and the industry’s) growing legitimacy on Wall Street. Piper Jaffray initiated coverage on Canopy with an overweight rating alongside another prominent Canadian cannabis company, Tilray (TLRY). Canopy Growth is a pure-play cannabis stock. It owns and operates several different brands, and produces/markets both medical and recreational strains of marijuana. The company is also reportedly in the process of developing a THC-infused beverage that is supposed to compete with mainstream alcoholic beverages. (See also: Top Marijuana/Cannabis Stocks to Watch in January 2019)
Constellation Brands (STZ) Tanks
This brings us to Constellation Brands (STZ), which owns such well-known alcoholic beverage brands as Corona Beer, Robert Mondavi Wines, and Svedka Vodka. The company recently announced a $4 billion investment in Canopy Growth (yes, the same company as mentioned above) as it looked to diversify its portfolio away from solely alcoholic beverages. STZ shares dropped sharply on Wednesday after its earnings outlook disappointed investors. The company expects its wine and spirits business to take a significant hit in 2019. Furthermore, its investment in Canopy Growth is seen as a long-term play and will be a drag on profits in the near-term. And since this major investment was financed with debt, interest expenses will likely reduce Constellation Brands’ earnings-per-share substantially.
So what does this tell us (if anything) about these two stocks. and pot stocks vs alcohol stocks in general? Not a great deal. But overall, marijuana/cannabis/pot stocks are on the rise. And as legalization continues, their further rise is pretty inevitable. Alcoholic beverages, the companies that produce them, and their stocks will likely always be around. But the longer-term foreseeable future probably belongs to marijuana products more so than old-school alcohol.
As always, research and invest wisely.
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Chief Market Strategist at The Technicals
With more than two decades of experience as an equity analyst for several major research firms, Don has covered individual stocks (both technically and fundamentally) across a wide variety of sectors and industries, including tech, financial, and retail. He has been quoted regularly in key financial media like Bloomberg and Reuters. Contact Don