3 Scenarios Where Aurora Cannabis (TSX:ACB) Dethrones Canopy Growth (TSX:WEED)

Only one cannabis company can assume market leadership. Aurora Cannabis Inc. (TSX:ACB)(NYSE:ACB) could dethrone Canopy Growth Corp (TSX:WEED)(NYSE:CGC) and wear the coveted crown.

| More on:
Golden crown on a red velvet background

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn moresdf

Ever since adult-use marijuana was legalized in Canada, cannabis companies intensified their marketing campaigns to win investors. Nearly all players are boasting first-mover advantages that will ensure industry-leading positions.

However, only the top-tiered weed companies, Aurora Cannabis (TSX:ACB)(NYSE:ACB) and Canopy Growth (TSX:WEED)(NYSE:CGC), have real potential to claim market leadership. The rest of the cannabis companies know that the two giants are in a different league.

The marijuana industry is forecasted to bring in annual sales of between $100 and $200 billion worldwide. With that market size, the company with the largest market capitalization can dominate both the domestic and international markets. But Aurora Cannabis, not Canopy Growth could be the top cannabis company.

Here are the different scenarios where Aurora Cannabis could dethrone Canopy Growth.

Production capacity will win out

Aurora’s production capacity is currently the best in the industry. The company can produce more than 600,000 kilograms of cannabis annually. The cannabis producer with the largest production capacity would have a tremendous advantage in an industry that is a volume game.

Canopy is bent on gaining superiority in the recreational market, because the consumer base is larger compared to medical cannabis. But currently, the market Canopy is focused on is beset with supply constraints which could drag on until 2021.

Meanwhile, Aurora has the infrastructure in place to serve both the recreational and medical marijuana markets. Since the recreational market is supply constrained, Aurora can increase higher-value revenues through the medical market. Canopy might need to refocus; otherwise, sales will be limited.

International presence is the key

Canopy Growth has a strong presence in the overseas market. But Aurora Cannabis has a wider international coverage with 24 countries versus Canopy’s 16 countries. The opportunity in the medical market abroad can surpass the entire Canadian marijuana market.

While Canopy reported higher international sales in the recent quarter, Aurora can generate more sales over the long run because of the stronger and expansive international presence. This is a significant factor in the near future, as there could be an oversupply problem in the domestic market.

Long-term game

Canopy Growth defended the removal of Bruce Linton as CEO by saying the board of directors and major investor Constellation Brands had had enough of high spending and swelling losses. The ill-timed firing of Canopy’s founder could affect the future of the cannabis global powerhouse.

Constellation Brands is saving face and Canopy would be hard-pressed to find a suitable replacement for Linton. A person who will be tasked to curtail expenses and focus on profits will not cut it. The company needs a visionary who will inspire and set a direction.

Aurora Cannabis has assembled a team that is committed to long-term growth and profitability. Canopy is hampered by the loss of a capable leader and is focused on short-term goals. Aurora is dead set on capturing the bigger pie, which is the medical marijuana market.

Given the three scenarios, Aurora Cannabis could be the top cannabis company and deserving of a higher premium than Canopy Growth.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Christopher Liew has no position in any of the stocks mentioned.

More on Cannabis Stocks

Cannabis smoke
Cannabis Stocks

Canopy Growth Stock: Is Now a Good Time to Invest?

The road ahead is highly uncertain for Canopy Growth, as the stock is plagued with losses and seemingly unsurmountable industry…

Read more »

Cannabis grows at a commercial farm.
Cannabis Stocks

TLRY Stock: Should You Invest Now?

TLRY is a Canadian cannabis stock which is trading 91% below record highs. Let's see if you should own TLRY…

Read more »

Cannabis grows at a commercial farm.
Cannabis Stocks

Is Tilray Stock a Buy in February 2023?

Despite the volatile cannabis sector, Tilray could be a superb buy for long-term investors.

Read more »

Young woman sat at laptop by a window
Cannabis Stocks

Is SNDL Stock a Buy in February 2023?

SNDL is a beaten-down cannabis stock. While its revenue growth is exceptional, a weak balance sheet has driven stock prices…

Read more »

A cannabis plant grows.
Cannabis Stocks

TLRY Stock: Here’s What’s Coming in 2023

Tilray Inc. (TSX:TLRY) is geared up for big growth this decade and looks like one of the top cannabis stocks…

Read more »

A person holds a small glass jar of marijuana.
Cannabis Stocks

Canopy Growth Stock: Here’s What’s Coming in 2023

Canopy Growth stock has made a lot of new moves in the last few months, but where is the company…

Read more »

A cannabis plant grows.
Cannabis Stocks

Better Cannabis Buy: Canopy Growth Stock or Tilray?

Only two TSX weed stocks can deliver substantial returns in the highly anticipated growth of the global cannabis market.

Read more »

Medicinal research is conducted on cannabis.
Cannabis Stocks

Is Tilray Stock a Buy in January 2023?

Tilray stock has lost 50% of its value in the last 12 months, in line with its peers.

Read more »