Canopy Growth vs. Tilray

Triston Martin

Jan 22, 2024

The cannabis industry is expanding rapidly, and investors' enthusiasm has been extremely high. Despite it being true that while cannabis businesses are mostly untested, there are substantial legal barriers and thresholds for the U.S., and the industry itself is changing drastically. However, analysts have concentrated on a few companies poised to establish their authority over their competitors. They include Canopy Growth Corp. (CGC) and Tilray (TLRY). On the surface, they have a lot of similarities. Both are based in Canada, where recreational marijuana usage was made legal in October of 2018. Both have also been featured in news reports due to their aggressive expansion policies and their ambitious goals moving forward. However, how do they compare one another in a clear comparison?

Market Cap and Share Price

Each of Canopy Growth and Tilray has witnessed huge gains in their share prices and their total market capitalizations in the past year. On February 2, 2021, Canopy saw its share price rise by nearly 25% in the year to date, and its market capitalization was up by close to 63 percent. However, Tilray's share price and market cap have nearly doubled in the past year.

What's the reason for the stark variation? Canopy Growth increased its shares outstanding by just 68% in 2018, while Tilray raised its share outstanding by less than percent. This is why Tilray had its market capitalization and share gains rise nearly in tandem, whereas the Canopy figures were vastly different.

What Do The New Shares Mean?

Canopy issued a significant amount of shares in the period 2018. The reason was to raise money to continue funding expansion initiatives. Tilray, however, announced its IPO at the end of July, providing the company with a huge amount of cash to meet its goals. Both Canopy and Tilray expanded aggressively in the year 2018. Canopy started 2018 with a CAD$175-million bought-deal financing deal. Canopy purchased several businesses in 2018, including the Canadian-based cannabis firm Hiku Brands and Colorado-based research company ebbu. Canopy Growth has also rapidly increased its capacity for production in the last two months. As of November, the company had a license of 4.3 million square feet of production capacity.

The best thing that could happen to Canopy The most important thing for Canopy could be the way that the beer huge Constellation Brands (STZ) bought up the entire $4 billion worth of the company in a deal of more than 100 million shares of its common stock. It puts Canopy in a great position regarding funds to fund ongoing development, research, and expansion in the future.

Tilray Changes its Strategy

Although many cannabis companies have taken over space to construct cultivator facilities, the Tilray method has been unique. Tilray has witnessed its market value grow dramatically, but it hasn't emphasized cultivation in the same way its competitors do. Although this might seem odd, it could give Tilray an advantage over the long run. If marijuana production becomes an inexpensive and low-cost enterprise, major producers may be in an uphill battle to stay afloat.

Tilray, however, on the contrary, might make a move to purchase rather than increase its inventory. Tilray has recently made progress in the Latin American market through its acquisition of Alef Biotechnology, and it is continuing to focus its efforts on studies on medical marijuana and research. However, towards the year's close, Tilray saw its prices fall and negative earnings estimates, according to NASDAQ. It is unclear if this is a temporary risk to the downside or a hint of the future; it remains to be determined.

Cannabis Market

If more states within the U.S. legalize cannabis for recreational and medical use, companies such as Tilray and Canopy Growth will have an increased market to compete in. According to a study by New Frontier Data, the U.S. should see ten new legalized cannabis markets open by 2021 or 2022 that projecting a growth of 16% in sales of cannabis by 2025. This will total $43 billion. The study also found that the number of patient’s registered using medical cannabis is predicted to grow to 5.4 million Americans in 2025. Currently, 43 percent of the adult population resides in states with adult-use laws, around 141 million Americans.

However, there are many challenges to the industry of cannabis because of the numerous U.S. regulations surrounding marijuana use and the amount of cannabis that is permissible. States' restrictions could include medical use only; 38 states have allowed the use of cannabis for adult and medical purposes, whereas adult usage is only permitted within 18 states. In the near future, the acceptance of cannabis in Europe and the United States for recreational and medical purposes will be crucial to companies such as Tilray and Canopy Growth and the success of the cannabis industry.

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