On Thursday, Canopy Growth (WEED) (CGC) experienced one of its worst days. The stock fell nearly 14% during the day. The company faced significant selling pressure after its dismal first-quarter earnings report. Amid the selling pressure, Canopy Growth’s ex-CEO, Bruce Linton, increased his investment in the company. In an interview with BNN Bloomberg, Linton stated that he’s still positive about the company’s future.
Why is Bruce Linton buying shares?
Digging deeper into the rationale, Linton thinks that Canopy Growth has a lot of opportunities ahead. He added that there’s an “opportunity for increasingly sophisticated global and national recreational and medical products” for the company. Linton was talking about the edibles and derivative products expected to launch sometime next year.
Currently, Canada is still working on regulating cannabis edibles and beverages. The regulation will likely pass by the end of this year. The market will likely be around $2.7 billion. Canopy Growth has been investing heavily to develop the products geared for this market. On the medical front, the company expanded into the medical space in international markets. Germany is one of Canopy Growth’s biggest markets outside of Canada. Last year, the company acquired Cannabinoid Compound Company.
Aggressive growth initiatives impacted the company’s cost structure. Upfront expenses impacted Canopy Growth’s profitability during the second quarter. The company reported an adjusted EBITDA loss of 92 million Canadian dollars.
Is the market focusing on the short term?
The market might be putting too much weight on the company’s short-term performance metrics. Acquisition investments will eventually lead to profits. Will the companies add to Canopy Growth’s profit soon enough?
The cannabis market is attractive. How each company taps the potential is vital for investors. For example, Tilray (TLRY) also missed the expectations. Aphria (APHA) was able to turn itself around after reporting a surprise profit. As a result, Jim Cramer thinks investors must be “selective” in picking their cannabis stocks.