Canopy Growth Stock Plummets 18%. Is CGC Stock A Buy? (NYSE: CGC)

Canopy Growth Stock (NYSE: CGC), the Canadian cannabis producer, slumped 18.74% to $17.65 on 1 PM Friday, a steep plunge that came after the company announced its fourth-quarter profit before the market opened. Canopy’s fourth-quarter net revenue fell 13% sequentially to 107.9 million Canadian dollars.

Why Canopy Growth Stock (CGC) Dropped?

However, it is crucial to understand why Canopy performed poorly; the company posted a net loss of $1.2 million, or $0.01 per share, compared with what analysts had expected. Any company that falls short of Wall Street’s expectations by a multiple must face the consequences.

The COVID-19 pandemic was a significant factor in Canopy’s decline in sales; the company closed all its retail stores in March, and its sales fell 31% sequentially. This resulted in a net loss of $1.2 million, or $0.01 per share, in the first quarter.

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CGC’s sales of medical marijuana and other medical cannabis products increased; this was not enough to offset the loss of $1.2 million, or $0.01 per share, in the first quarter.

The decrease in sales – off trickled down to Canopy’s bottom line, but higher operating costs were also partly to blame, resulting in a net loss. But the biggest problem was the company’s restructuring costs, which cost it $1.2 million, or $0.01 per share, in the first quarter.

Is Canopy Growth Stock (CGC) A Buy?

Many investors are asking if they should buy Canopy Growth Stock (CGC).  The short answer is YES, Canopy Growth Stock (CGC) is a buy if: 1) You realize this is risky stock and it makes sense for your investment portfolio.  The volatility of marijuana stocks are very high and considered high risk.  A stock like this may be a short term trade.

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The excellent news for Canopy is that the adverse effects of the COVID-19 pandemic will be temporary. The Canadian economy and its reopening are expected to boost the company’s sales. Value adjustments, losses, and restructuring costs are also time issues that will not be an issue in the future.

There is a glimmer of hope. The good news is that investors had hoped the company would be on a clear path to profitability. Canopy withdrew its previous milestone to achieve positive adjusted EBITDA and positive net income. Depending on what happens with the COVID-19 outbreak, a new measure of corporate performance will be provided.

Canopy Growth Stock (CGC) Target Recommendations

May-22-20 Resumed BofA/Merrill Buy
Apr-16-20 Upgrade Jefferies Underperform → Hold $17.30 → $15.60
Jan-28-20 Upgrade BMO Capital Markets Market Perform → Outperform
Dec-12-19 Reiterated Cantor Fitzgerald Neutral $18.90 → $27
Nov-20-19 Upgrade BofA/Merrill Neutral → Buy
Nov-15-19 Downgrade Alliance Global Partners Buy → Neutral
Nov-05-19 Initiated Cantor Fitzgerald Neutral
Oct-14-19 Downgrade Seaport Global Securities Buy → Neutral
Oct-11-19 Downgrade Jefferies Hold → Underperform
Sep-27-19 Downgrade BofA/Merrill Buy → Neutral
Sep-20-19 Initiated MKM Partners Neutral
Sep-18-19 Initiated Oppenheimer Perform
Aug-26-19 Upgrade Seaport Global Securities Neutral → Buy
Jul-17-19 Initiated Ladenburg Thalmann Buy
Jul-05-19 Downgrade Bryan Garnier Buy → Neutral
Jun-28-19 Initiated Consumer Edge Research Equal Weight
Jun-06-19 Initiated Stifel Buy
May-13-19 Initiated Alliance Global Partners Buy
Apr-26-19 Initiated Desjardins Buy
Apr-17-19 Initiated BofA/Merrill Buy

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