Why Constellation Brands Remains Bullish on Canopy Growth
It has been five years since alcoholic beverage maker Constellation Brands (NYSE: STZ) first invested in pot producer Canopy Growth (NASDAQ: CGC). In 2017, it paid $190 million for take a 10% stake in the business. The following year it invested another $4 billion. Today, Constellation Brands owns 38.6% of the cannabis business. However, Canopy Growth hasn't made for a great investment thus far -- its top and bottom lines have struggled, and its share price has collapsed.
But despite the adversity, Constellation Brands remains committed to the business, even after recently incurring a major impairment charge against its investment.
On Oct. 6, Constellation Brands released its most recent results for the period ended Aug. 31. The results weren't pretty: The company's net loss was a hefty $1.1 billion, versus a profit of $11.9 million in the prior-year period. The big reason the company's financials were so far in the red was due to an impairment charge that Constellation Brands recorded on its investment in Canopy Growth. Even so, Constellation Brands shares are down only 10% this year, less than half the decline in the S&P 500 Index.
Source Fool.com
