Constellation Brands Inc. (NYSE:STZ) was down 0.56% in late morning trading on July 3. The stock has plunged 6.3% over the past week. Shares are in negative territory for 2018, but there are good reasons for investors to buy-low as we enter the thick of summer.
Back in late 2017 Constellation Brands pushed to acquire a 9.9% stake in Canopy Growth Corp., which at the time was the largest cannabis producer in Canada. Constellation is one of the largest alcoholic beverage suppliers in the United States, producing beer, wine, and other spirits. Cannabis-infused drinks have been a hit in recreational markets in the United States, which has likely piqued the interest of companies like Constellation Brands.
Canada has committed to a holding pattern on edibles but investors should probably expect to see regulatory approval come by 2020. Constellation saw net sales of spirits drop 8% in its first-quarter report, but its investment in Canopy Growth is already paying off. CFO Eric Klein said in the earnings call that Constellation won about $258 million in “pre-tax unrealized gain from the change in fair value of the Canopy Growth investment and warrants”. It has reported a net gain of $700 million from a still-early investment.
Constellation will likely see even greater long-term impact as cannabis-infused drinks begin to enter the market in Canada and the United States. Investors should take advantage of the current dip. In addition to its growth potential Constellation also boasts a quarterly dividend of $0.72 per share representing a 1% dividend yield.
