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Canopy Growth (TSE:WEED)
TSX:WEED
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Canopy Growth
(TSX:WEED)
32Underperform
Positive Factors
Cost Management
The company demonstrated commitment to profitability with a 35% gross margin and significant cost-cutting measures, including reductions in cost of goods sold and selling, general, and administrative costs.
Sales Growth
Storz & Bickel sales showed strong growth, particularly in Germany and the US, contributing positively to Canopy's sales figures.
Negative Factors
Profitability Challenges
Profitability for Canopy Growth is expected to take longer to achieve due to adjusted EBITDA estimates being reduced.
Regulatory Uncertainty
The uncertainty of US federal reform timeline affects institutional investor interest and industry profitability.
Valuation Concerns
Canopy Growth's current EV/sales is at a significant premium to peers despite a spotty operational track record.
Canopy Growth (WEED) vs. S&P 500 (SPY)
Market Cap
$290.12M
Dividend YieldN/A
Average Volume (3M)1.75M
Price to Earnings (P/E)―
Beta (1Y)2.18
Revenue Growth-16.27%
EPS Growth76.17%
CountryCA
Employees1,029
SectorHealthcare
Sector Strength78
IndustryPharmaceuticals
Share Statistics
EPS (TTM)-5.22
Shares Outstanding156,202,450
10 Day Avg. Volume1,133,386
30 Day Avg. Volume1,754,730
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)0.68
Price to Cash Flow (P/CF)-1.50
P/FCF Ratio0.00
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
C$4.33Price Target Upside172.40% Upside
Rating ConsensusModerate Sell
Number of Analyst Covering6
Canopy Growth Business Overview & Revenue Model
Company DescriptionCanopy Growth Corporation, trading under the ticker WEED, is a leading diversified cannabis and cannabinoid-based consumer product company. Headquartered in Smiths Falls, Ontario, Canada, Canopy Growth operates in the cannabis sector, producing and selling a wide range of products, including dried cannabis flower, oil, softgel capsules, and edibles. The company is also involved in the production of hemp-based products and has a presence in both the medical and recreational cannabis markets. With its focus on innovation and quality, Canopy Growth aims to improve lives by unleashing the full potential of cannabis.
How the Company Makes MoneyCanopy Growth generates revenue primarily through the cultivation, production, and sale of cannabis and cannabis-related products. Key revenue streams include the sale of recreational and medical cannabis products in Canada and other international markets where cannabis is legal. The company also earns from its portfolio of brands, such as Tweed, Spectrum Therapeutics, and Tokyo Smoke, which offer a variety of consumer-focused cannabis products. Additionally, Canopy Growth has formed strategic partnerships and collaborations to enhance its market reach and product offerings, including a significant partnership with Constellation Brands, a leading beverage alcohol company. These partnerships and its expansion into the U.S. cannabidiol (CBD) market further contribute to its revenue model.
Canopy Growth Financial Statement Overview
Summary
Canopy Growth faces significant financial challenges with declining revenue, negative profitability margins, and cash flow inefficiencies. Despite some improvements in gross profit margin, the company's balance sheet stability is undermined by declining equity and poor returns on equity. The cash flow position remains weak, highlighting the need for strategic improvements to achieve sustainable financial health.Income Statement
Canopy Growth has experienced a significant decline in revenue from 2022 to TTM (Trailing-Twelve-Months), with a revenue growth rate of -46.8%. The gross profit margin for TTM is 27.9%, which shows improvement from previous periods. However, net profit margin remains deeply negative at -169.7%, indicating ongoing profitability challenges. The company also reports negative EBIT and EBITDA margins, reflecting operational inefficiencies.25
Negative
Balance Sheet
The company's balance sheet shows a moderate debt-to-equity ratio of 0.83 in TTM, indicating a balanced approach to financing with equity. However, a declining equity ratio of 50.8% in TTM suggests a reduction in asset leverage. Return on equity is significantly negative at -79.4%, pointing to poor returns on shareholder investments.40
Negative
Cash Flow
Canopy Growth's cash flow statement reveals a negative free cash flow with no growth, as well as an operating cash flow to net income ratio of 0.33 in TTM, reflecting inefficiencies in converting income into cash. The company's free cash flow to net income ratio is negative, indicating operational cash flow challenges.30
Negative
| Breakdown | |||||
| TTM | Mar 2024 | Mar 2023 | Mar 2022 | Mar 2021 | Mar 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 276.75M | 297.15M | 402.90M | 520.33M | 546.65M | 398.77M | Gross Profit |
| 77.23M | 79.90M | -104.14M | -193.05M | 66.96M | -31.68M | EBIT |
| -124.87M | -228.71M | 1.67B | -1.08B | 44.30M | -1.67B | EBITDA |
| -348.67M | -312.83M | -2.88B | -121.15M | -1.50B | -1.31B | Net Income Common Stockholders |
| -469.66M | -657.27M | -3.31B | -320.49M | -1.67B | -1.39B |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 178.34M | 205.83M | 782.60M | 1.37B | 2.30B | 1.98B | Total Assets |
| 1.16B | 1.30B | 2.44B | 5.62B | 6.82B | 6.86B | Total Debt |
| 489.67M | 668.00M | 1.31B | 1.50B | 1.58B | 625.82M | Net Debt |
| 327.76M | 497.70M | 629.87M | 724.99M | 428.31M | -677.36M | Total Liabilities |
| 572.74M | 799.82M | 1.68B | 1.98B | 3.20B | 1.68B | Stockholders Equity |
| 591.48M | 500.37M | 758.43M | 3.59B | 3.48B | 4.89B |
| Cash Flow | Free Cash Flow | ||||
| -162.87M | -285.95M | -568.10M | -593.92M | -639.87M | -1.49B | Operating Cash Flow |
| -154.66M | -281.95M | -557.55M | -545.81M | -465.73M | -772.63M | Investing Cash Flow |
| -7.30M | 241.59M | 433.38M | 230.82M | -884.11M | -347.65M | Financing Cash Flow |
| 173.09M | -465.06M | -19.69M | -45.53M | 1.26B | -57.16M |
Canopy Growth Technical Analysis
Negative
1.59
Price Trends
2.89
Negative
4.23
Negative
6.38
Negative
Market Momentum
-0.39
Positive
23.89
Positive
6.52
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:WEED, the sentiment is Negative. The current price of 1.59 is below the 20-day moving average (MA) of 2.12, below the 50-day MA of 2.89, and below the 200-day MA of 6.38, indicating a bearish trend. The MACD of -0.39 indicates Positive momentum. The RSI at 23.89 is Positive, neither overbought nor oversold. The STOCH value of 6.52 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for TSE:WEED.
Canopy Growth Risk Analysis
Canopy Growth disclosed 92 risk factors in its most recent earnings report. Canopy Growth reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Canopy Growth Peers Comparison
Overall Rating
UnderperformOutperform
Sector (49)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
68 Neutral | $1.06B | 18.67 | 3.80% | ― | 35.87% | ― | |
53 Neutral | $351.26M | 27.53 | 4.78% | ― | 16.39% | -98.10% | |
49 Neutral | $6.90B | -0.08 | -53.01% | 2.43% | 24.84% | -3.06% | |
47 Neutral | $183.01M | ― | -18.27% | ― | 7.33% | 84.41% | |
32 Underperform | $290.12M | ― | -84.50% | ― | -16.27% | 76.17% |
* Healthcare Sector Average
Performance Comparison
TSE:WEED
Canopy Growth
1.59
-2.33
-59.44%
TSE:CRON
Cronos Group
2.73
0.08
3.02%
TSE:ACB
Aurora Cannabis
6.26
2.31
58.48%
TSE:OGI
OrganiGram Holdings
1.42
-1.19
-45.59%
Canopy Growth Earnings Call Summary
Earnings Call Date: Feb 7, 2025 | % Change Since: -60.15% | Next Earnings Date: May 30, 2025
Earnings Call Sentiment Neutral
Canopy Growth demonstrated strong performance in medical cannabis and launched successful new products like Claybourne. However, challenges in adult use revenue, overall revenue decline, and increased competition in Australia highlight the difficulties faced. Despite these challenges, the company showed significant improvement in profitability and cash flow, indicating a positive trend towards achieving sustained profitability.Highlights
Medical Cannabis Success
In Canada, medical cannabis business posted record revenue with 16% year-over-year growth. Internationally, Canopy Growth has a strong position in markets like Germany, Poland, and Australia, with European markets experiencing over 70% growth.
Launch of Claybourne Brand
In less than six weeks, the Claybourne brand became the number three infused pre-roll in British Columbia and Ontario, indicating successful market penetration and consumer acceptance.
Storz & Bickel Performance
Storz & Bickel reported a 19% revenue increase to CAD22 million in Q3, driven by robust direct-to-consumer online sales and strong performance in Germany.
Improved EBITDA and Cash Flow
Adjusted EBITDA loss improved by 61% to CAD3 million, and free cash flow outflow improved by 17% to CAD28 million compared to Q3 of fiscal '24.
Successful Cost Reductions
Sales and marketing and G&A expenses declined 24% year-over-year, with significant progress in reducing cash costs related to legacy facilities.
Lowlights
Overall Revenue Decline
Consolidated net revenue decreased by 5% year-over-year to CAD75 million, primarily due to divested businesses.
Decline in Gross Margin
Consolidated gross margin fell to 32% from 36% a year ago, reflecting increased costs, including higher initial costs for Claybourne production.
Challenges in Adult Use Business
The adult use business in Canada was down 10% year-over-year, despite a 15% increase quarter-over-quarter.
Increased Competition in Australia
Sales in the Australian market declined due to increased competition, affecting the overall performance in international markets.
Higher Shipping Costs Affect S&B Margin
Storz & Bickel's gross margin decreased to 41% from 51% last year due to higher indirect costs, including shipping.
Company Guidance
During Canopy Growth's third-quarter fiscal 2025 earnings call, the company provided several key metrics and insights into its performance and future outlook. Consolidated net revenue for the quarter was CAD75 million, marking a 5% decrease year-over-year, or an 8% increase excluding divested businesses. The gross margin stood at 32%, down from 36% the previous year. However, the adjusted EBITDA loss significantly narrowed to CAD3 million, a 61% improvement compared to the same quarter last year, while free cash flow was an outflow of CAD28 million, a 17% improvement year-over-year. The Canadian market saw net revenue of CAD41 million, with notable growth in the medical cannabis segment, up 16%, and an increase in adult-use revenue by 15% quarter-over-quarter. International markets, particularly in Europe, showed promising growth with a 14% year-over-year increase in net revenue, driven by strong performance in Poland and Germany. The Storz & Bickel segment also performed robustly, with a 19% increase in revenue, totaling CAD22 million for the quarter. The company indicated that achieving positive adjusted EBITDA is within reach in the coming quarters and highlighted ongoing efforts to improve profitability and cash flow into fiscal 2026.Canopy Growth Corporate Events
Private Placements and FinancingBusiness Operations and Strategy
Canopy Growth Launches US$200 Million Equity Program to Strengthen Financial Position
Positive
Feb 28, 2025
Canopy Growth Corporation has launched a new at-the-market equity program allowing the issuance and sale of up to US$200 million in common shares. The proceeds are intended to bolster the company’s financial position by reducing debt, enhancing cash reserves, and supporting strategic mergers and acquisitions. This move is expected to strengthen Canopy Growth’s market positioning and operational capabilities.
Product-Related AnnouncementsBusiness Operations and Strategy
Canopy Growth Expands Tweed Brand into German Medical Cannabis Market
Positive
Feb 27, 2025
Canopy Growth has launched its Tweed brand in the German medical cannabis market, introducing four new strains through a partnership with Portuguese cultivator Gro-Vida. This expansion, which includes the earlier introduction of the Glitter Bomb strain via Cansativa, aims to meet the increasing demand for high-THC genetics among German medical patients, enhancing Canopy Growth’s presence in the European market.
Product-Related Announcements
Canopy Growth Expands Beverage Lineup with New Flavors
Positive
Feb 13, 2025
Canopy Growth has expanded its Deep Space Propulsion beverage lineup with the launch of two new cannabis-infused flavors: Rocket Root Beer and Charged Cream Soda. These beverages, developed in Canada, feature 10mg of THC and 10mg of CBG per can, offering consumers a unique taste experience. The expansion strengthens Canopy Growth’s leadership in the cannabis beverage category, offering a premium range of drinks now available in select regions across Canada.
Product-Related AnnouncementsBusiness Operations and StrategyFinancial Disclosures
Canopy Growth Shows Strong Product Performance and Financial Improvements in Q3 FY2025
Positive
Feb 7, 2025
Canopy Growth reported its financial results for the third quarter of fiscal year 2025, highlighting a strong performance in its medical cannabis segment and an increase in international market revenues. The company’s new product, Claybourne infused pre-rolls, quickly achieved notable market share in Canada. Despite a 5% decrease in net revenue compared to the previous year, excluding divested businesses, revenue actually grew by 8%. The company’s financial position improved with a reduction in total debt and operating losses, driven by cost savings and strategic actions.
Financial Disclosures
Canopy Growth to Announce Q3 Fiscal 2025 Results
Neutral
Jan 24, 2025
Canopy Growth Corporation announced it will release its third-quarter fiscal year 2025 financial results on February 7, 2025. The company will hold an audio webcast following the release, which will be hosted by CEO Luc Mongeau and CFO Judy Hong. This announcement is a crucial moment for stakeholders to assess the company’s performance and strategic direction, particularly given its significant operations in multiple international markets and its strategic positioning in the U.S. THC market.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.