Categories Analysis, Cannabis

Why Canopy Growth (CGC) might put investors in high spirits this year

For the cannabis industry, 2019 was a tough year though most companies started it on an optimistic note. With the year coming to an end, the market is currently pinning hope on cannabis 2.0 products and the expansion of store networks to give the market a new lease of life.

Also see: Beer firms expect new fizz from cannabis ventures?

While the marijuana boom continues to gather pace, several companies struggle with their piling up inventories, and Canopy Growth (NYSE: CGC) (TSX: WEED) is no exception. At the same time, the company has been building up its dried-flower inventory to monetize the growing demand for recreational cannabis in Canada. In the US, more states are legalizing pot-based products, which is expected to pick up pace in 2020.

Hold It!

Canopy growth might not be a wise investment option right now, despite the relatively low price and the market’s bullish outlook on the industry. Experts, in general, recommend hold, with a target price of around $25 that represents a 6% upside on the last closing price. The rating calls for patience on the part of investors while keeping a close watch on the stock for signs of retreat.

Canopy Growth (NYSE: CGC) posts wider-than-expected loss in Q2

Meanwhile, investor confidence remains weak due to factors like the company’s dismal quarterly performance and lack of clarity on Constellation Brands’ (STZ) stake in it, especially after the recent appointment of Constellation executive David Klein as the CEO of Canopy Growth.

New Hope

On the positive side, there is widespread optimism about Klein’s ability to take the company to the growth path. Moreover, the fact that Canopy Growth’s fundamentals are stronger than most of its rivals, including Tilray (TLRY) and Aurora Cannabis (ACB), makes it less risky. Its cash position is exceptionally good and far outweighs the liabilities.

Also Read:  Facebook gallops way ahead leaving Snap behind

Dismal Q2

In the second quarter, net loss missed the estimates amid cost escalation, though revenues more than doubled and topped the street view reflecting the strong marijuana harvest. Meanwhile, the loss narrowed to C$1.08 per share from last year’s C$1.52 per share loss. Though the outcome took a toll on the stock, it is certainly on the recovery path now.

Also see: Canopy Growth Q1 2020 Earnings Call Transcript

Two months ago, Canopy Growth’s shares slipped a two-year low, continuing the downtrend that started about a year ago that dragged their value by about 25%. However, there are reasons to believe that the bottom is already in. The stock closed the last trading session sharply higher.

We’re on Apple News! Follow us to receive the latest stock market, earnings and financial news at your fingertips

Most Popular

Vail Resorts (MTN) can reward investors once it gets past market crisis

The recent travel restrictions have taken a heavy toll on the tourism industry, leaving almost all destinations deserted. Vail Resorts Inc. (NYSE: MTN), a leading operator of mountain ski resorts,

The coming months will prove to be a testing time for Boeing (BA)

Shares of Boeing Co. (NYSE: BA) were up 13% in afternoon hours on Monday. The stock is down 63% from its 52-week high of $391. As the aviation industry suffers

Wayfair (W) stock looks less attractive despite low price, thanks to market selloff

Shareholders of online furniture retailer Wayfair Inc. (NYSE: W) have been speculating about their returns for long, with the stock not making any meaningful gains in the past several months.

Top