Roth/MKM cuts Canopy Growth stock price target to C$10

On Wednesday, Roth/MKM maintained a positive stance on Canopy Growth (NASDAQ:CGC) shares, despite reducing the price target to C$10 from the previous C$15. The firm continues to endorse a Buy rating for the cannabis company, which is listed on the Canadian Securities Exchange (WEED:CN) and on the NASDAQ (CGC). Currently trading at $1.81, the stock has experienced significant volatility, with InvestingPro data showing a 71% decline over the past six months. The adjustment follows the recent earnings report from Aurora Cannabis (NASDAQ:ACB), which had set a precedent that sparked expectations for Canopy Growth’s operational performance.

Analysts at Roth/MKM noted that while Canopy Growth did not exhibit the same level of fundamental upside as Aurora, the company has made consistent advances. According to InvestingPro data, while the company’s EBITDA remains negative at -$35.19M, it shows substantial improvement from previous losses. The company maintains strong liquidity with a current ratio of 3.52, though its overall financial health score remains weak at 1.67 out of 10. The firm highlighted Canopy Growth’s expansion in Poland and Germany as key contributors to margin accretive growth.

The reassessment of Canopy Growth’s price target comes with an optimistic view of the company’s operations, particularly in European markets. The analysts emphasized that the current valuation of Canopy Growth’s shares does not include any speculative premiums for potential legislative changes. With a price-to-book ratio of 0.65 and trading near its 52-week low, InvestingPro analysis suggests the stock is currently fairly valued, with 12 additional ProTips available to subscribers regarding the company’s financial position and market performance.

Roth/MKM’s commentary underscores the company’s progress toward achieving financial stability without relying on external factors such as legislative changes. The firm’s reiteration of the Buy rating, coupled with the lowered price target, reflects a belief in Canopy Growth’s core business strength and its potential for continued growth in the cannabis industry.

In other recent news, Canopy Growth Corp has filed a prospectus supplement with the Securities and Exchange Commission for the resale of common shares by certain selling securityholders. This move allows the shareholders to resell their shares in the open market at their discretion. The filing indicates that an aggregate of 7,631,637 common shares may be sold from time to time. The legality of the common shares being offered has been confirmed by a legal opinion from Cassels Brock & Blackwell LLP.

In another development, shares of major Canadian cannabis companies, including Canopy Growth, experienced a downturn after President Donald Trump announced the imposition of a 25% tariff on Canada. The new tariffs have raised concerns about increased costs for Canadian cannabis operators and potential disruptions in their supply chains. Investors reacted swiftly to the news, reflecting unease about the potential financial strain on these companies. These are recent developments that could potentially impact the financial performance of Canopy Growth Corp.

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