Friday, 19 April 2024

Why Canopy Growth Stock Is Glowing Green Today

by BD Banks

Thursday is looking like a great day to own Canopy Growth (NASDAQ: CGC) stock — and state legislators are to thank for it. Shares of the Canadian cannabis company are up a solid 20% on positive momentum for the passage of a SAFER law that would give marijuana businesses access to loans and other banking services.

As Marijuana Moment reports today, the National Conference of State Legislatures (NCSL) just sent a letter to Congress, urging passage of marijuana banking reform this year.

Support for SAFER marijuana

Current law discourages banks from extending loans to marijuana businesses or allowing them to open bank accounts. If passed, the Secure and Fair Enforcement Regulation (SAFER) Banking Act would change this.

As the NCSL argues in its letter, “cannabis will remain illegal under the SAFER Banking Act.” Passing SAFER doesn’t “endorse” marijuana legalization. What the law would do, however, is permit banks “to provide services to [marijuana] businesses without penalty” in states where cannabis is legal, so sales won’t need to operate on a “cash-only” basis.

The legislators argue their main goals in urging this course are to (1) facilitate states taxing and regulating marijuana, and (2) reduce marijuana-related crime rates. However, a side effect of SAFER’s passage would be to lower the cost of operating marijuana businesses, smooth operations, and make them more profitable.

Should you buy Canopy Growth stock?

Here’s the thing Canopy Growth investors need to remember: Congress has debated SAFER for years, and support for the legislation is overwhelming. The likelihood that SAFER will become law — and that marijuana will eventually become legal — is no secret.

Most analysts who follow Canopy Growth stock still don’t think the company is going to be able to earn a profit anytime soon. The earliest most analysts see Canopy Growth stock turning profitable is 2028, nearly a half-decade in the future.

When you consider how far away the payoff is on this stock, I see little reason for Canopy Growth to be up 20% today.

Should you invest $1,000 in Canopy Growth right now?

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.