It wasn’t very long ago that skittish investors were divesting themselves of Canopy Growth (NYSE:CGC) stock due to the ousting of former CEO Bruce Linton, who had a role in founding the company and making it into the cannabis behemoth it is today.
Since then, the CGC stock price slid all the way down to the $23.50 area in what was a weak summer for the broader sector. Lately, though, we’re starting to see signs of life in CGC stock.
Are the persistent critics right to call this a head fake, or is the turnaround real and likely to continue?
Oppenheimer (Sort of) Likes CGC
Canopy Growth stock recently made the financial headlines when Rupesh Parikh, an analyst from Oppenheimer, gave CGC a rating of “perform.” That might sound like an odd rating, as we’re accustomed to hearing terms like “buy,” “sell,” “hold,” “overweight,” “underweight,” “outperform” and so on.
“Perform” is essentially a synonym for “neutral,” so we can’t really extract much meaning from that particular rating. Parikh also didn’t provide a price target for CGC stock, so that leaves investors wondering whether the Oppenheimer analyst has anything meaningful to say about Canopy Growth at all.
However, that’s not the full story. Parikh had some encouraging things to say about the company’s prospects going forward. In particular, he suggested that Canopy Growth is the best-positioned company to profit from the international cannabis industry over time — high praise and an assertion that I wouldn’t dispute.
But wait, it only gets better. The analyst cited the Constellation Brands (NYSE:STZ) cash infusion along with Canopy Growth’s sizable footprint in the Canadian legalized cannabis market as two indicators that CGC will claim more than its fair share of the market.
Buy it Now, Watch it Grow
To be fair, Parikh wasn’t all bullish. He did air concerns regarding “a difficult backdrop” and “regulatory delays.” Presumably, Parikh is referring to Health Canada’s massive backlog of cannabis sales, processing and cultivation licenses which are still awaiting review.
Governments aren’t known for being efficient, so I’m not surprised at all by Health Canada’s lack of efficiency. Unfortunately, there’s been a domino effect. The government’s slowness has led to supply shortages throughout the Canadian cannabis industry. And this issue has persisted ever since Canada legalized cannabis for adult use back in October 2018.
To me, these are just the growing pains of a burgeoning industry. They are not a major cause for concern and certainly no reason to dump one’s CGC stock shares. As for Linton’s departure, Canopy Growth’s chairman John Bell had some reassuring words for nervous shareholders.
“We have identified and are interviewing an exceptionally talented pool of well-seasoned executives,” Bell told CGC shareholders. “With the process well along, we anticipate, and I am confident that, the CEO transition will be completed by the end of the current calendar year.”
As for Bruce Linton, there’s no need to send him any sympathy cards. He’s already moved on to roles as an advisor and activist investor for several companies including Gage Cannabis and Mind Medicine. Besides, you may recall that Linton bought a boatload of Canopy Growth shares last month, so clearly he still believes in the future of the company.
My Takeaway on CGC Stock
I’m not particularly worried about the future of CGC stock or the Canadian cannabis industry. Like Bruce Linton, Canadian cannabis will be just fine. It’s time to leave the past in the past, and look forward to better days ahead.
As of this writing, David Moadel did not hold a position in any of the aforementioned securities.
