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Canopy Growth: Analysts’ Views after Its Earnings


Aug. 19 2019, Published 7:33 a.m. ET

Canopy Growth (WEED) (CGC) didn’t impress investors with its earnings for the first quarter of 2020. The stock has fallen 12.4% since the company’s earnings. Let’s discuss what analysts have to say about the company’s target price after its earnings.

Canopy Growth missed analysts’ revenue estimates by a wide margin. The company also missed the bottom-line estimates. Overall, the company reported huge losses during the quarter. Management cited expansion costs in the US and globally as the reason for the loss. To learn more about the company’s first-quarter results, read Canopy Growth Earnings Impacted the Cannabis Sector.

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Analysts’ coverage for Canopy Growth

The current overall consensus rating for Canopy Growth is a “buy.” Among the 20 analysts covering the company, nine recommended a “strong buy,” seven recommended a “hold,” and four recommended a “sell.”

Aurora Cannabis (ACB) and HEXO (HEXO) have a consensus “buy” rating, while Cronos Group (CRON) has a consensus “hold” rating.

Target price

As of August 16, Canopy Growth’s target price was 56.67 Canadian dollars. The target price represents an upside of 52% from the closing price of 37.25 Canadian dollars. On the same day, the Horizons Marijuana Life Sciences ETF (HMMJ) gained 2.3%, while Canopy Growth closed 2.8% higher.

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Analysts’ rating changes after earnings

Alliance Global Partners cut Canopy Growth’s target price to 55 Canadian dollars from 67 Canadian dollars with a “buy” rating. Cowen and Company cut the target price to 48 Canadian dollars from 82 Canadian dollars with a “outperform” rating. PI Financial reduced the target price to 50 Canadian dollars from 80 Canadian dollars with a “buy” rating. CIBC cut the target price to 50 Canadian dollars from 80 Canadian dollars. Canaccord Genuity cut the target price to 60 Canadian dollars from 70 Canadian dollars. Benchmark cut the price target to 60 Canadian dollars from 100 Canadian dollars. Meanwhile, Coremark Securities downgraded the stock to “market perform” from “buy.” The company reduced the target price to 48 Canadian dollars from 55 Canadian dollars.

Analysts’ view on Canopy Growth after earnings

After Canopy Growth’s first-quarter results, many analysts had negative views about the stock. Analysts think that the stock has a long way to profitability. The wider-than-expected net loss might have urged analysts to lower the company’s target price.

A Dankr.ca article mentioned that Ryan Tomkins, an analyst with Jefferies International, said, “While strong harvest figures should allay crop failure worries, elsewhere we see little to reassure investors that significant [sustainable] sales growth and profitability will be visible in the near future.”

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The same article said that Bank of Montreal analyst Tamy Chen thinks that Canopy Growth’s margins and cash flows could deteriorate more. She also said that while Canopy Growth invests in value-added products, the manufacturing cost is higher. Higher costs could lead to rising operational expenditure. The decline in Canopy Growth’s target price insinuates lower confidence about the company’s profitability driving the stock performance.

What Jim Cramer said about Canopy Growth

Despite the profitability and structural changes, Jim Cramer, CNBC’s Mad Money host, thinks that Canopy Growth is a good stock in the marijuana industry. Read Why Jim Cramer Favors CRON and CGC to learn more. Last week, Cramer said that the cannabis sector is hot again. He favors Canopy Growth and Cronos Group due to their growth potential. To learn more, read Jim Cramer Thinks Cannabis Is Back in Action.

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YTD stock performance

Currently, Canopy Growth is trading 8% higher than its 52-week low of 34.36 Canadian dollars. The stock is trading 51.4% lower than its 52-week high of $76.68. The company has returned 1.75% YTD (year-to-date). Canopy Growth has underperformed the broader equity market as well. The S&P 500 Index has increased 15.2% YTD. Canopy Growth’s stock decline last week dragged other cannabis players too.

Peers in the industry

Most of the cannabis stocks fell on August 15. Tilray fell 10.0%, while CannTrust fell 6.6%. Aurora Cannabis, Cronos Group, HEXO, and Aphria also fell 5.7%, 8.8%, 6.5%, and 7.6%, respectively. However, the stocks bounced back on August 16 and closed higher. Canopy Growth rose 2.3% on August 16. Aurora Cannabis, HEXO, and Aphria (APHA) rose 3.9%, 3.8%, and 3.8%, respectively. Meanwhile, Tilray (TLRY) and Cronos Group fell 10.8% and 0.06%.

Cresco Labs (CRLBF) is scheduled to report its results this week. Read Cresco Labs Stock Tumbling ahead of Earnings to know more. The stock rose 7.9% on August 16.

Recently, IIPR reported impressive results. Read IIPR’s Q2 Earnings Call: Key Takeaways for Investors and Why IIPR’s Q2 Earnings Came in Strong to learn more. The stock has gained 133.7% YTD.

To know more about analysts’ target price and valuation for other cannabis stocks, read Tilray: Target Price and Valuation Multiple and Aurora Cannabis’s Target Price and Valuation. Read Which Are the Best Cannabis Stocks in August? for more industry updates in August.

Stay tuned to get more insights into the cannabis industry.


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