Shares in Constellation Brands drop nearly 30 percent in 2018

USA | Constellation Brands, which is the number three brewer in the US, saw its stock decline about 30 percent from its 30 April 2018 high of USD 236.62. At the end of December 2018, it stood at only USD 162.86.

There are probably several explanations for Constellation’s sinking share price. But the main reason is the devastation taking place in the cannabis sector, which has pulled down the share price of Canopy Growth, in which it has a big stake.

Take it as a symptom of the irrationality surrounding cannabis’ potential market clout that the Motley Fool website, on 29 December 2018, felt justified in offering a highly speculative scenario, under which Canopy Growth will not exist in five years’ time – at least not as a stand-alone company. This forecast is based on the assumption that the US will legalise recreational cannabis on the federal level too, which will open the way for Canopy Growth to compete in the huge US marijuana market.

Should this happen, Constellation would be daft not to exercise its options to gain a controlling interest in Canopy Growth, the Motley Fool argues. This move is probably at least a couple of years away, but by 2023 Canopy Growth could be a subsidiary of Constellation Brands.

However, like all forecasts, the ones concerning the cannabis market should be treated with scepticism, bearing in mind that they are highly fallible.