There’s plenty to be excited about in the cannabis space, and Canada’s Canopy Growth (TSX:WEED) is certainly at the center of it.
The company announced last week that it will soon be added to the healthcare sector of the S&P/TSX Composite Index (INDEXTSI:OSPTX). Trading will begin on March 20, and according to The Globe and Mail, Canopy will be the first cannabis-focused company to join the index.
Bruce Linton, chairman and CEO of Canopy, said in a statement that being added to the index is “an important accomplishment” that reflects the work the company has done.
Canopy’s addition to the index is also good news for investors. “With international operations, high profile partnerships, and expansion plans all developing rapidly, being included in the index acts as another layer of credibility investors can point to,” Linton noted.
Daniel Pearlstein, an analyst who covers the marijuana space for Eight Capital, made a similar comment. “Canopy’s inclusion upon the next rebalancing expected this Friday March 17, 2017 will likely drive more investors to the name, and the sector as whole,” he said in an email.
That said, some market watchers are a little more reserved about the announcement. Canaccord Genuity analyst Neil Maruoka believes that while Canopy is a “dominant player” in the Canadian marijuana industry, the company “is fully valued at current levels.”
“While we appreciate Canopy’s scale and expect that its powerful brands will likely position the company as a dominant player in the emerging recreational market, we do have some reservations about the current valuation and near-term upside for the stock once the bill for the legalization of cannabis is tabled in Parliament,” he said in a research report.
“If and when this significant industry catalyst is off the table, we see the potential for profit-taking for this fairly valued stock,” he added.
In order to be eligible to list on the S&P/TSX Composite Index, companies must meet certain market cap, liquidity and domicile requirements. They must also have been listed on the TSX for at least six months. Canopy joined the TSX in July 2016, and before that had been trading on the TSXV for two years.
Since news hit that Canopy will be added to the S&P/TSX Composite Index, its share price has risen 0.09 percent. It closed at $11.08 on Thursday (March 16).
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Securities Disclosure: I, Jocelyn Aspa, hold no direct investment interest in any company mentioned in this article.