- Canopy Growth (TSX:WEED) stock has had a tumultuous trading history and investors want to know if is a good buy for their portfolios today
- The Smith Falls, Ontario-based company was once the leader of the budding Canadian cannabis industry, but the company’s stock has lost more than 98 per cent of its value since 2019
- Managing liquidity issues, the company has taken several steps to turn profitable
- The company’s adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) loss for the period was C$11.9 million, much lower than the C$56.4 million loss that was logged the year before
Canopy Growth (TSX:WEED) stock has had a tumultuous trading history and investors want to know if is a good buy for their portfolios today.
Budding growth, or ashes to ashes?
The Smith Falls, Ontario-based company was once the leader of the budding Canadian cannabis industry, but the company’s stock has lost more than 98 per cent of its value since 2019.
During this time, the average price for a gram of cannabis in Canada fell from C$11 in 2019, to C$7 in 2021, to as low as C$3.50 per gram this month, according to research from Deloitte Canada, Hifyre, BDSA, and Cannabis Benchmarks, exacerbating losses from industry-wide overproduction tied to initial rosy growth forecasts from the late 2010s.
Managing liquidity issues, the company has taken several steps to turn profitable, including cutting jobs, departing from some international markets, store closures, closing its hallmark 1 Hershey facility, and the divestiture of its retail business across Canada.
In September, Canopy stated it would seek bankruptcy protection for its sports nutrition products segment BioSteel and lay off 181 employees to rein in costs and focus on cannabis.
However, the story isn’t all doom and gloom for the company
Just two months later, Canopy reported making strides in its moves to reduce its debt. The company reported a cost reduction of C$54 million in Q2 2024, bringing the total reduction to C$226 million since the beginning of fiscal year 2023. Canopy Growth is targeting a cost reduction of C$270 million to C$300 million by the end of its fiscal year 2024. Its operating expenses were down nearly 80 per cent at C$30.43 million.
For the quarter, Canopy reported net revenue totalling just under C$70 million, down 21 per cent from the near C$88 million it posted in the same period last year. While revenue was down, the silver lining was that the company had achieved a consolidated gross margin of 34 per cent in Q2 2024, compared to a negative margin for the same time last year.
The company’s adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) loss for the period was C$11.9 million, much lower than the C$56.4 million loss that was logged the year before.
David Klein, Canopy’s CEO, said in a statement that this reflects how effective the company’s business transformation initiatives have been since they were implemented at the beginning of fiscal 2023.
“Canopy Growth has successfully transformed into an asset-light, cannabis-focused company with a stronger balance sheet,” he said. “These actions have resulted in a company that looks and operates fundamentally different than before, a Canopy Growth that is purpose-built for the markets and geographies of greatest opportunity.”
Looking forward
The leadership team at the helm of Canopy Growth is still confident that positive EBITDA can be achieved across all its business units by the end of fiscal 2024. Canopy Growth is targeting a cost reduction of C$270 million to C$300 million by the end of its fiscal year 2024.
One area that has seen consistent growth is its Canadian medical business, which delivered a fourth consecutive quarter of revenue growth. Wana gummies are available to the company’s registered medical cannabis patients in Canada. The company is executing a plan to re-introduce its Wana brand in the Canadian adult-use cannabis market, including planned new product introductions and active outreach to key retailers in the second half of its fiscal 2024.
About the company
Canopy Growth is one of North America’s top cannabis and consumer packaged goods companies with a wide range of premium and mainstream brands under its belt, including Doja, 7ACRES, Tweed and Deep Space. Canopy Growth’s CPG portfolio features targeted 24-hour skincare and wellness solutions from This Works, gourmet wellness products by Martha Stewart CBD, and vaporizer technology made in Germany by Storz & Bickel.
Canopy Growth last traded at $0.73 per share and its stock has fallen more than 83 per cent in the past year, though it is up 4.2 per cent on the month.
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