Canopy Growth Stock Falls after Downgrade


Sep. 30 2019, Updated 10:10 a.m. ET

On Friday, Bank of America (or BofA) downgraded Canopy Growth (WEED) (CGC) from “buy” to “neutral,” reports TheStreet. BofA also lowered WEED’s price target from $46 to $27, which implies a 13.3% upside from its Friday closing price of $23.83.

The Street reports BofA analyst Christopher Carey expects the Canadian cannabis sector’s growth to slow down to flat in this year’s second half. He foresees a similar slowdown for Canopy, and thinks analysts’ current estimates for the company are on the higher side. He expects the growing concerns over vaping to dent cannabis stocks. After BofA’s downgrade, Canopy stock fell 3.9%.

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Other analysts’ ratings

Analysts are bullish on Canopy. As of September 27, three of the 21 analysts covering its stock suggested “strong buy,” nine suggested “buy,” and nine suggested “hold.”

As shown in the above graph, analysts’ 12-month price target for Canopy has fallen since May. Their price target of 53.19 Canadian dollars implies a 68.5% upside from its stock price of 31.56 Canadian dollars. Let’s look at analysts’ recommendations for Canopy’s peers.

  • For Aurora Cannabis (ACB), 47.1% of the 17 analysts covering the stock suggest “buy.” Their average price target of 10.10 Canadian dollars for ACB implies a 12-month return of 65%.
  • Of the 21 analysts covering Tilray (TLRY), most (61.1%) suggest “hold.” Their average price target of $48.58 for TLRY implies an 87.3% return.
  • For Cronos Group (CRON), 69.2% of the 13 analysts covering the stock suggest “hold.” The average price target of 20.03 Canadian dollars for CRON implies a 61.7% return.
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Canopy’s stock performance this year

Canopy Growth’s stock has been under pressure since the company reported weaker-than-expected fiscal 2020 first-quarter results. Since the company missed analysts’ top- and bottom-line expectations on August 14, its stock had fallen 25.9% as of Friday. However, the company is getting ready for Canada’s second phase of legalization, which is set to legalize cannabis-derived product sales. The company also plans to launch vapes in Canadian markets in December.

This year, Canopy stock has fallen 13.8%. Meanwhile, peer stocks Aurora, Tilray, and Cronos have fallen 9.7%, 63.2%, and 16.0%, respectively.

After reporting lower-than-expected fourth-quarter revenue, Aurora announced its plans for Canada 2.0 and the expansion of its US cannabidiol business. Last month, Tilray reported its second-quarter results, beating analysts’ revenue estimate. However, its loss was higher than expected, dragging down its stock. To learn more, read Tilray: Target Price and Valuation Multiple.

Cronos also reported a greater-than-expected loss in the second quarter. For more on the stock, read Why Does Jim Cramer Like Cronos Group and Aphria?


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