Canopy Growth Continues To Get Beat Up By The Streets Top Broker Dealers

During the last quarter, several Canadian and Wall Street firms lowered their price targets on leading North America cannabis businesses. 

After we analyzed the most recent price target changes on certain Canadian Licensed Producers (LPs), we determined that the size of price target cuts (from a percentage standpoint) by broker-dealers have significantly increased. 

The Canadian LP we selected to better explain this trend is Canopy Growth Corporation (TSX: WEED) (Nasdaq: CGC), which was the largest cannabis company in the world a few years ago (based on market capitalization). Below we highlighted changes in price target on Canopy Growth since November and believe our readers should be aware of this.

1. February 7th – Eight Capital cut its price target by approx. 42% (from C$12 to C$7)
2. February 2nd – CIBC cut its price target by 25% (from C$12 to C$9)
3. January 6th – AGP cut its price target by approx. 38%  (from C$18 to C$11)
4. Dec 22nd – Bank of America cut its price target by approx. 47%  (from C$18 to C$11)
5. Dec 19th – Piper Sandler cut its price target by approx. 39%  (from $11 to $7)
6. November 9th – MKM cut its price target by 45% (from C$51 to C$28)
7. November 8th – Canaccord Genuity cut its price target by 52%  (from C$25 to C$12)
8. November 8th – Cowen cut its price target by 51% (from C$33 to C$16)

Over the course of this timeframe, three broker-dealers changed its rating on Canopy Growth to Sell and we find this to be significant. The three firms were Bank of America, Canaccord Genuity, and Piper Sandler.

Trying to Better Understand the Rating Changes on Canopy Growth

After further analyzing the ratings changes by broker-dealers from a timing standpoint, we learned that the changes were related to Canopy Growth reporting earnings and announcing plans to sell its German medical cannabis business. 

We were surprised to learn that Canopy Growth was exiting the German cannabis market and the market did not respond favorably to the announcement. We consider the European Union (EU) to be an attractive long-term opportunity and were especially bullish on Germany due a change in leadership (new political party is more favorable on legalizing recreational cannabis).

Canopy Growth said the primary reasons for selling its German medical business were:

1. Supports the plan to continue to evolve into a consumer packaged goods (CPG) business
2. Part of its strategy to enhance its focus on its core markets.
3. Will continue to sell cannabis products in certain international medical markets as well as the Canadian recreational market 
4. The sale will allow Canopy Growth to avoid future operational complexities and lower its short-term investment capital needs by C$50+ million 

Will Canopy Growth Turn the Business Around in 2022?

Although Canopy Growth has fallen more than 85% from its 52-week high, the stock has rallied more than 15% off its January lows and momentum (as measured by the relative strength index or RSI) has been trending higher. 

Based on Canopy Growth’s market capitalization (as of February 7th), the business is valued at less than C$4 billion. At one point, the Canadian LP was valued at more than C$20 billion and we will monitor how the business evolves in 2022. 

If you are interested in learning more about how Canopy Growth’s business has changed, please send an email to support@technical420.com with the subject “Canopy Growth” to be added to our distribution list. 

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Michael Berger is Managing Partner of StoneBridge Partners LLC. SBP continues to drive market awareness for leading firms in the cannabis industry throughout the U.S. and abroad.

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