Canopy Growth Stock Rises, Oppenheimer Initiates Coverage


Nov. 20 2020, Updated 4:56 p.m. ET

Canopy Growth (CGC) (WEED) stock suffered in August following weaker results. However, the stock started September on a good note. Notably, CGC rose 1.4% and WEED rose 2.0% on Wednesday after Oppenheimer initiated coverage. Let’s see what’s happening with the stock and the company.

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Oppenheimer initiates coverage on Canopy Growth

On Wednesday, a MarketWatch report stated that Oppenheimer analyst Rupesh Parikh initiated coverage on Canopy Growth stock. The analyst gave a “perform” rating with no target price.

Canopy Growth didn’t perform well in the first quarter of 2020. Overall, the company reported extensive losses during the quarter. Canopy Growth missed the revenue estimates and reported net revenues of 90.5 million Canadian dollars. The company also missed the bottom-line forecast and reported a net loss of 1.2 billion Canadian dollars.

The Oppenheimer analyst thinks that Canopy Growth could still capitalize on the global cannabis market. He thinks that the company has an edge over other companies. Canopy Growth’s diversified global market captured the US, Canada, and Europe. The company also holds strong capital strength. Constellation Brands (STZ) is the company’s largest shareholder.

Currently, 20 analysts cover Canopy Growth stock. Among the analysts, four recommend a “strong-buy,” nine recommend a “buy,” and seven recommend a “hold.” The stock’s current target price is set at 55.7 Canadian dollars. The target price represents an upside potential of 46% from the current price.

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What else is Canopy Growth up to?

Canopy Growth’s recent stock increase could also be attributed to the announcement about looking for a new CEO. Meanwhile, the company’s ex-CEO and founder, Bruce Linton, took on a new role. On Wednesday, I discussed how the timing of the news might have benefited the stock. To learn more, read Canopy Growth Looks for CEO, Linton Gets a New Role. The stock has gained 22.0% in September and 7.0% year-to-date.

Recently, Canopy Growth also announced its medical division Spectrum Therapeutics. The company partnered with Quebec’s Santé Cannabis and launched a medical training program. The Prescriber Training Program aims to help physicians and patients.

Challenges for cannabis players 

Cannabis is a highly regulated industry. As a result, regulatory issues and scandals impact cannabis companies. We saw what happened with CannTrust (CTST) (TRST). The company suffered a lot after violating Health Canada regulations. CannTrust fired its CEO following Health Canada’s accusations of non-compliant growth activities.

Health Canada even suspended CannTrust’s license. So far, the stock is trading in the red in September. Notably, CannTrust stock has fallen 27.0% this month. Will the stock fall below $1?

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Canada will legalize cannabis-edibles and beverages next month. The legalization gives cannabis players an excellent opportunity to expand into the edibles market. In the first-quarter earnings call, Canopy Growth announced that it has invested in a range of new feature and function-rich vape products to grow its CBD business in the US. Aurora Cannabis (ACB) and OrganiGram (OGI) are also gearing up to grow their businesses.

Meanwhile, Canopy Growth and other cannabis players face challenges in the US market. They’re dealing with regulatory issues related to CBD-based products. The FDA is still hesitant about CBD products. The agency sent warning letters to many cannabis companies this year, including Curaleaf (CURLF). Marijuana legalization at the federal level would solve many of the issues. The US is still waiting for a decision about legalization. Meanwhile, Democrats and Republicans are taking small steps to help the cannabis industry. To learn more, read Cannabis: House to Vote on US Banking Bill.

Stay with us to gain more insights into the cannabis industry.


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