Canopy Growth Corp. (NYSE:CGC) (TSX:WEED) is doubling down on its investment in U.S. hemp cultivation and now aims to operate processing facilities in seven states within the next 12 months.
Once the farm bill passed late last year, Canopy Growth wasted little time and secured a hemp license and invested $150 million for cultivation and extraction of hemp-derived CBD in New York state.
The Ontario-based cannabis firm was then front and center of much bigger expansion, and more complicated, arrangement with Acreage Holdings Inc. (CSE:ACRG.U) once the country legalizes pot federally.
In the meantime, hemp-derived products are creating large opportunities and Canopy Growth CEO Bruce Linton told Yahoo Finance the buzz around the space is gaining momentum faster than he anticipated, so now is the time to invest.
“We’re not going to be the farmer, but what we’re going to do is we’re gonna take the plant and we’re going to process it, and then we’re going to put the resulting ingredients into products that people want to buy. And we think there’s a big market to do it,” Linton said.
The U.S. CBD market is expected to balloon to $22 billion by 2022, according to cannabis researchers at Brightfield Group.
Charlotte’s Web Holdings, Inc. (TSX:CWEB) is an example of a hemp or cannabis company doing well in the CBD space. The Colorado-based company’s CBD-focused strategy allows it to avoid the same legal and logistical obstacles that other U.S. cannabis companies deal with. And now that hemp is legal federally, companies can move products like CBD across the country and through state lines.
In Canopy’s case, however, it’s not clear if its latest hemp investment is based on a need for more production capacity because all it would need is New York state to operate in with hemp legally allowed to move around the country.
But as Canopy waits for federal legalization to lock up with U.S. partner Acreage, its clear its focus is shifted to hemp, and Linton said he is finished with making deals until that happens. He added even if he were to be offered a deal from another U.S. cannabis company, he would defer the issue to Acreage.
Takeaways for investors
After Canopy Growth said no further U.S. acquisitions will happen until it closes its deal with Acreage, it should allow quell any speculation from investors on future deals for now.
Instead, cannabis investors are patiently awaiting Canopy’s next set of earning due Thursday, June 20, which is suppose to be a tone setter and the next big milestone for the sector. According to FactSet analysts, Canopy’s revenue is expected to soar to CAD$90.9 million from CAD$22.8 million a year ago.