Buy Alert: Molson Coors (TSX:TPX.B) Might Buy This Pot Stock

Molson Coors Canada Inc. (TSX:TPX.B)(NYSE:TAP) is a Canadian icon.  Last year, it generated more than $10 billion in sales.

But there’s a problem: growth has stagnated. Last quarter, revenue declined by 8.7% year over year.

“After a corporate restructuring in the fourth quarter of 2019 and a bevy of new products hitting the market in the New Year, Molson Coors Beverage Company was poised for a strong 2020,” an industry journal noted. The coronavirus, rising debt levels, and internal issues have turned this year of promise into a dud.

“Despite the early progress, our first quarter results were disproportionately affected by the coronavirus, a pandemic that has changed the world — not just for our business, and our industry, but for the entire global economy,” CEO Gavin Hattersley recently said.

“Like everyone else, the full impact and what our new normal looks like going forward is still uncertain, but coronavirus has had, and will have, a material impact on our business,” he concluded.

To be sure, Molson Coors is still profitable. It still owns many of the most popular beer brands on the planet. And its war chest of capital is a force to be reckoned with. Yet one thing is for certain: the business needs to find a new way to grow.

It’s too easy to connect the dots here. Expect the company completely acquire an under-the-radar pot stock: Hexo Corp (TSX:HEXO)(NYSE:HEXO).

Molson Coors is ready to strike

From the start, Hexo took a different path. When the industry was booming in 2018, most competitors tried to ramp production as quickly as possible. We realize now that this was a poor strategy. Raw cannabis is a commodity, and higher industry supply means lower pricing, which causes profits to evaporate.

To avoid this, Hexo focused on value-add products. That included branding its production to instill customer loyalty and pricing power, similar to what Coca-Cola did with sugar and water.

It’s no wonder, then, that Hexo partnered with Molson Coors to co-launch a cannabis-infused beverage. Hexo brings the marijuana expertise, while Molson provides the brand power.

Value-add products like this, those that are backed by trusted brands, have the best odds of generating profits for shareholders. Molson knows that first-hand, which is why it partnered with Hexo in the first place.

Most pot investors are still focused on flowers and smokable products. Long term, however, it will be consumables like THC beverages that offer the biggest opportunities for growth.

“In order to get to the glory days, these cannabis 2.0 products need to come to market, and they need to be really successfully and widely adopted by those beyond just your avid cannabis enthusiast,” a cannabis expert told Insurance Business. “I’m hopeful that in ten years, a soccer mom will debate between a gourmet chocolate or a glass of wine in the evening.”

Cannabis is going to be a huge market. By the end of the decade, global sales should surpass $100 billion. This is a prime opportunity for Molson Coors to re-energize its growth trajectory.

It has a current deal with Hexo to experiment with new products. Expect that deal to be a precursor to an outright buyout.

The list below includes our favourite rapid-growth stocks to buy right now…

The 10 Best Stocks to Buy This Month

Renowned Canadian investor Iain Butler just named 10 stocks for Canadians to buy TODAY. So if you’re tired of reading about other people getting rich in the stock market, this might be a good day for you.
Because Motley Fool Canada is offering a full 65% off the list price of their top stock-picking service, plus a complete membership fee back guarantee on what you pay for the service. Simply click here to discover how you can take advantage of this.

Click Here to Learn More Today!

More reading

The Motley Fool recommends HEXO. and HEXO. Fool contributor Ryan Vanzo has no position in any stocks mentioned.

The post Buy Alert: Molson Coors (TSX:TPX.B) Might Buy This Pot Stock appeared first on The Motley Fool Canada.

Source: The Fool
Buy Alert: Molson Coors (TSX:TPX.B) Might Buy This Pot Stock
The Fool

The Motley Fool
Contributor for
The Motley Fool is dedicated to helping the world invest — better. Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, mutual funds, and premium investing services.

In all we do, we take a different approach.

We believe – and have proven over decades – that the individual investor can beat the market.

We believe that anyone can do it, even if they don’t have a lot of time or money to devote to investing.

We believe in a long-term outlook, helping people build wealth over time.

We believe that the person best positioned to take care of your financial future is you.

And we work tirelessly on behalf of our hundreds of thousands of members who are enjoying the opportunities that come with having enough money to do the things that matter to them.

While we are headquartered in Alexandria, Va., The Motley Fool advocates for the individual investor around the globe with offices in the UK, Australia, Canada, Singapore, and Germany.

Related posts