Earnings season is in full swing, and in a matter of weeks, the Canadian cannabis company Canopy Growth (NYSE:CGC) will report its fiscal 2020 second-quarter earnings. Wall Street is likely heading into this latest earnings report with bated breath, not sure what they’ll find out.
After all, 2019 hasn’t been a great year for the cannabis industry in general. Marijuana stocks have been plagued by regulatory issues, disappointing earnings and an overall lingering negativity. CGC stock has been downgraded three times over the past month, and half the analysts reviewing the stock gave it a hold rating.
Let’s take a look at Wall Street’s expectations, as well as the company’s own guidance for fiscal 2020. This will give us a better sense of what we can expect from Canopy Growth going forward.
What Can We Expect From CGC Stock?
During the second quarter, Wall Street analysts are expecting Canopy Growth’s revenue to surpass 112 million CAD. For the full fiscal year, analysts expect the company’s revenue to reach 547 million CAD.
If the company manages to hit these targets, it will be a significant step up from a year earlier. However, it will fall significantly short of the company’s original estimates to bring in 1 billion CAD in sales in fiscal 2020. The company fell short on revenue expectations in 2019 as well.
Canopy Growth lowered its earnings estimates for a couple reasons. First, the entire cannabis industry has been under pressure and falling short on earnings results.
And Canada’s second wave of cannabis legalization is taking much longer than anyone originally anticipated. Plus, ongoing concerns about vaping-related health problems have weighed on cannabis companies as well.
There Are Still Reasons to Be Hopeful About Canopy Growth
Going forward, Canopy Growth needs to find a way to differentiate itself from the other emerging cannabis companies. And of course, the company needs to find a way to finally become profitable.
However, all hope is not lost when it comes to Canopy Growth stock. The company’s most recent earnings report showed signs of strong growth. And unlike other cannabis companies, CGC has benefited greatly from several high-profile brand partnerships.
And Wall Street still seems to have a lot of optimism left when it comes to the stock. The company is considered a moderate buy, and its average price target is $34.59, which represents a 72% upside. According to a Piper Jaffray analyst, the company has an attractive cash position right now.
Canopy’s low valuation could make it a worthwhile investment, but only for investors who can stomach a certain amount of risk. The company does have the potential for significant upside, but there are just too many unknowns at this point.
As of this writing, Jamie Johnson did not hold a position in any of the aforementioned securities.