Should You Buy Canopy Growth (CGC) Stock Before May 30?


  • Cannabis operator Canopy Growth (CGC) has been rising this week off favorable developments.
  • President Biden stated that cannabis will move down the restriction category.
  • CGC stock still faces questions ahead of its fiscal Q4 report on May 30.
CGC stock - Should You Buy Canopy Growth (CGC) Stock Before May 30?

Source: T. Schneider / Shutterstock

On paper, stakeholders of cannabis operator Canopy Growth (NASDAQ:CGC) have plenty of reasons to smile. Anticipation of major marijuana policy shifts culminated in a recent announcement by President Joe Biden that the government will reclassify the controversial plant. However, questions still dog CGC stock ahead of Canopy’s first-quarter earnings report.

One of the most significant developments regarding the legalization movement came Thursday when President Biden posted a video message regarding his administration’s intentions to reclassify marijuana from a Schedule I drug to Schedule III. “Too many lives have been upended because of our failed approach to marijuana,” he remarked.

As InvestorPlace’s Shrey Dua noted, the move is significant. “Schedule I drugs are considered to have virtually no health benefits and are highly addictive. Other drugs in this class include heroin and LSD. Meanwhile, Schedule III drugs reflect a low-to-moderate potential for dependence, with some medicinal uses to boot,” Dua wrote.

From a financial perspective, the policy shift carries potential tax benefits. Schedule I drugs, Dua stated, face “steep taxes and regulation that may ease in the face of the progressive legislation.” Still, Canopy must deliver, and that’s where CGC stock becomes a complex picture.

CGC Stock Counts Down to a Critical Earnings Showdown

Since the beginning of the year, CGC stock gained about 126% in equity value. However, the overall ride has been incredibly choppy. In the past 52 weeks, the security has only gained roughly 3%. Therefore, longstanding skepticism still surrounds the cannabis enterprise.

For the fiscal fourth quarter, Wall Street analysts are targeting a consensus loss per share of 33 cents. On the high side, the most optimistic expert anticipates a loss of 15 cents, whereas the pessimistic view calls for 58 cents in the red. In the year-ago quarter, Canopy suffered a loss of $9.46 per share.

On the top line, analysts, on average, are looking for sales of $53.23 million. Notably, the high-side estimate calls for $63.5 million, while the pessimistic view sits at $50.56 million. In Q4 of the prior year, Canopy generated revenue of $64.64 million.

Data from Yahoo Finance reveals no EPS revisions for the upcoming earnings disclosure. And only one expert upped the bottom-line target in the past seven days.

However, not everyone is convinced about CGC stock despite the reclassification news. In particular, Bank of America Securities Lisa Lewandowski reiterated a “sell” rating on Canopy. Per Markets Insider, Lewandowski cited multiple headwinds, “including a projected stagnation in quarterly sales and the company’s valuation presenting a significant premium to its peers despite operational inconsistencies.”

Should You Buy Canopy Growth?

Although CGC stock is exciting, it still carries a moderate sell consensus view among analysts. Naturally, Lewandowski’s downbeat assessment doesn’t help. Significantly, the expert mentioned that true reform will be necessary for Canadian cannabis operators to profitably venture into the U.S. market. Therefore, prospective investors will want to exercise caution, especially at the current valuation.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.

Article printed from InvestorPlace Media,

©2024 InvestorPlace Media, LLC