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w obstacle to edibles and beverages is the time delay from consumption to effect. Lexaria’s tech could reduce that to minutes and therefore a cannabis infused drink could mirror that of its alcohol based counterpart. Lexaria’s tech is also proving successful in the edibles markets. Remember, 50% of adults would try legal cannabis in an edible or beverage.
w We have said again from day-1 that one cannot use the traditional metrics of valuation in an industry where past revenues are often irrelevant to future revenues and this is especially true were recreational use cannabis is currently illegal but will be legal before long (such as in Canada). This again is the transference of an entire industry and economy from illegal to legal. We also know as mentioned the percentage drop in Alcohol sales and the portion of the population that will try cannabis as an edible or beverage.
w Animal Care and Hemp … Canopy growth is invested directly or indirectly in both
w And so on …
Constellation Brands first and foremost needs to protect its market share and revenue in a world where all data shows that a significant volume of alcohol consumption will shift to cannabis consumption. One must assume that Constellation dedicated significant resources in pricing that deal with Canopy. That deal requires significant approvals on both sides of the border but if approved it completely dismisses those that perpetuated the misleading mythos of Canopy’s valuation and by extension much of the industry’s. Constellation naturally paid a premium as is typically the case, but not enough of a premium to give credit to those that attacked the valuation of Canopy and others either out of ignorance or, more likely, self-interest.
With the Canadian dollar’s low value, investing in the shares of Canadian companies and in Canadian currency may be ideal for many investors. For example, right now CDN$1 = USD$0.77. Once NAFTA settles and a few other events happen between now and November 6, 2018 inclusive, the Canadian dollar could appreciate in value. The President has stated he is against further rate increases at least in the short to mid-term. Working backwards, if the Canadian dollar increases from $0.77 to $0.85 that is a 10.4% ROI alone. That is because working backwards, as the Canadian Dollar increases in value it can “buy” more American dollars. Using Canopy growth as our example, shares of CGC are trading for USD$34.31 or on the TSX for $44.57 as I write this. Using an exchange rate of $0.77, USD$34.31 is about $44.56 which is what we expect to see as typically there should not be an arbitrage opportunity given the volume traded on both exchanges. Let ‘s assume Canopy’s shares reach the CDN$48.50 share price of the Constellation deal or let’s assume that is USD$37.35.