On the positive side, the Smiths Falls-based company is the king of Canadian cannabis and is anticipated to grow further by many, justifying the price paid by Constellation in October that equated to about $36.74 per share, below Canopy's current share price after surges Wednesday and Thursday.
The positive outlook was highlighted by incoming CEO Bill Newlands during the company's analyst call Wednesday.
"As we've discussed, we believe the emerging cannabis space represents one of the most significant global growth opportunities of the next decade, and frankly, our life time," he commented. "An opportunity that is opening up much more rapidly than originally anticipated."
Newlands pointed to the strong demand already shown in cannabis as justifying the company's investment so far, even before lines open up to the mammoth market available in the United States.
The demand in Canada is particularly important given Canopy Growth's preeminent status in the nation, controlling about 26% of the country's cannabis market.
Given such figures, the potential impact of Canopy is scarcely reflected in the relatively pedestrian PE ratio Constellation commands among its peers.
Analysts have noted that the weed leader's momentum is set to burn higher moving forward.
"We expect strong top-line growth, driven by strong sustainable category momentum. We also believe its clinical trials and intellectual property should add competitive advantages longer term," Piper Jaffray analyst Michael Lavery wrote on Wednesday. "It is difficult to predict all the ways the category may evolve, but we expect Canopy to remain a leader in the space and drive category growth."
The sustained momentum expectation is an expectation easily applicable to the Untied States where Pew polls have marked those in favor of legalization at over 60% of the population.
Medical marijuana is currently legal in over 25 countries, while recreational use is legal in Canada and Uruguay.
After the midterm elections in the United States, medical use is legal in 33 states and recreational use has been legalized by 10, suggesting a rapid shift in the world's largest potential market.
Farm Bill Favors First Movers
The momentum in the U.S. towards full federal legalization has been most notably stoked by the recently passed farm bill.
Canopy Growth was not shy about the bullseye the legislation painted firmly on the back of the U.S. market, responding immediately to the initiative.
"Canopy Growth will participate in the American market now that there is a clear federally-permissible path to the market," their press release stated. "Consistent with the spirit of the Farm Bill, Canopy Growth will participate in ways that support American farmers."
Analysts quickly picked up on the company's ability to again find itself at the forefront of industry shifting trends.
"We expect the bill to be a positive industry-wide catalyst, but players like Canopy could be positioned to move relatively quickly, with investments in US production likely," Piper Jaffray's Lavery commented.
He added that the companies hemp-specific properties, like ebbu Inc. in Colorado, and distribution lines provided by Constellation make the company the key player ready to seize on the law change.
To be sure, the FDA muddied the issue immediately with a long winded statement restricting CBD and THC cultivation.
"We treat products containing cannabis or cannabis-derived compounds as we do any other FDA-regulated products -- meaning they're subject to the same authorities and requirements as FDA-regulated products containing any other substance," the FDA wrote, "It's unlawful under the FD&C Act to introduce food containing added CBD or THC into interstate commerce, or to market CBD or THC products as, or in, dietary supplements, regardless of whether the substances are hemp-derived."
The FDA roadblock could certainly put a long-dated timeline on CGC's full impact on Constellation shares.
While the company is being touted as the key to unlocking Constellation's star value, patience will be a virtue while the marijuana market continues to develop.
Read Part 2 of this article, here.