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Why Canopy Growth Lost 20% in June

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Jun. 28 2019, Updated 7:33 a.m. ET

Canopy Growth’s performance

Canopy Growth (WEED) (CGC) lost ~20% in June—the worst month for the stock. The company’s performance was largely due to its fourth-quarter earnings. Canopy Growth, which released its earnings on June 20, missed analysts’ expectations. The stock fell after the company’s earnings. Canopy Growth’s recreational cannabis sales in the fourth quarter fell from the previous third quarter, which cast doubt on the demand for recreational cannabis. To learn more, read Key Takeaways from Canopy Growth’s Q4 Earnings Call.

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YTD performance and target price

Canopy Growth delivered negative returns in four of the six months. YTD (year-to-date), Canopy Growth has returned ~46%, Most of the gains were achieved in January. Tilray (TLRY) has returned -34%, Aphria (APHA) has returned 18%, and Aurora Cannabis (ACB) has returned 51% YTD.

After the company’s earnings, analysts lowered the target price on the stock for the next 12 months. The consensus target price for Canopy Growth stock fell to 72.3 Canadian dollars from 76.7 Canadian dollars in May—a fall of ~5.7%. Usually, when the target price is revised downwards, the stock faces selling pressure and vice versa. To learn more, read Canopy Growth’s Consensus Price Target Falls after Its Q4 Release.

Canopy Growth also provided future plans for its business. In the near term, the company expects downward pressure on its margins. As the company moves to higher margin products, its margins should reflect the shift in the product mix. Read Cannabis Industry: What’s the Next Phase? to learn more.

Canopy Growth is one of the strongest players in the cannabis sector. Canopy Growth has deep pockets to acquire companies. The company has a multi-pronged approach for capturing market share in Canada and the international market—a compelling reason to hold on to the stock when others in the market aren’t better off.

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