Canopy Growth Corp. Continues To Lose The Confidence Of The Retail and Institutional Investing Communities

Canopy Growth Corporation (TSX: WEED) (Nasdaq: CGC) was once considered to be the darling of the cannabis industry and was valued at more than C$15 billion earlier this year (based on market capitalization). 

Following a strong start to the year, Canopy Growth has come under heavy pressure and is currently valued at less than C$4.5 billion (based on market capitalization). 

From slowing growth to closing facilities, we believe the Canadian Licensed Producer (LP) will face several challenging headwinds in 2022. The name of the game for Canopy Growth in 2022 is profitability and many analysts are bearish on its potential to become a profitable business.

So far this year, broker-dealers have not responded favorably to Canopy Growth’s challenges and the average price target and rating assigned to the company have decreased. With 2021 coming to a close soon, we find this trend to be especially important and believe our readers should be aware of it.  

Earlier this week, Piper Sandler downgraded Canopy Growth to Underweight from Neutral. The broker-dealer also lowered its price target on the company to $7 price target from $11. We find the change to be significant and would not be surprised if Canopy Growth was downgraded by additional financial firms.  

Earlier this month, Wells Fargo & Company (NYSE: WFC) initiated coverage on Canopy Growth with an Underweight rating and an $8 price target. The bank initiated coverage less than a month after Barclays started to cover Canopy Growth and assigned it an Underweight rating and a $8 price target. 

We are favorable to Wells Fargo’s decision to start covering the cannabis sector due to the awareness that it will bring to it. According to the Wall Street bank, the legal and illicit cannabis market in the US is an approx. $83 billion market. Wells Fargo estimates the legal US cannabis market to be an approx. $25.4 billion market (approx. $9.8 billion of medical sales and $15.6 billion of recreational sales) and forecasts it to be a $63 billion market by 2030.  

If Wells Fargo started to cover the cannabis sector a few years ago, we believe the bank would have considered Canopy Growth to be a top play in the cannabis sector. Banks seem to be much less optimistic with the Canadian LP and we will monitor how the business performs in 2022 and beyond.

If you are interested in learning more about Canopy Growth, 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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