2021 has been a challenging year for Canopy Growth Corporation (TSX: WEED) (Nasdaq: CGC) and the stock is down more than 50% so far this year.
During the last month, we have noticed a substantial increase in the number of broker-dealers that are lowering their respective price target on the Canadian cannabis company and this represents a change when compared to prior years.
The primary reason for the lower price targets and rating downgrades on Canopy Growth is related to broker-dealers being less optimistic with the company’s goal of being a profitable business within the next three quarters.
A few months ago, Canopy Growth reported to have less market share of Canada’s recreational cannabis industry and the market did not respond favorably to this. The Canadian cannabis company attributed the lower market shares to closing retail stores during the pandemic, increasing competition from small and mid-size operators, and internal supply and execution challenges.
According to data that was sourced from HiFyre, Canopy Growth’s has recorded a double-digit percentage decline in the amount of products that are being purchased by consumers from retail stores and online (on a month-over-month basis).
Due to this decline, several broker-dealers lowered second-quarter revenue expectations by more than $35 million. We consider this amount to be substantial and will monitor how the business evolves over the next year.
Following Canopy Growth’s announcement in August, the following broker-dealers lower their respective price target on the Canadian cannabis company:
- September 22nd – CIBC lowered its price target to C$22 from C$27
- September 19th – Piper Sandler lowered its price target to $15 from $19
- August 9th – Stifel lowered its price target to C$18 from C$21
- August 9th – Canaccord Genuity lowered its price target to C$25 from C$30
- August 8th – CIBC lowered its price target to C$27 from C$30
- August 8th – Piper Sandler lowered its price target to $19 from $24
We are cautious with the current trend for Canopy Growth and will monitor how the business continues to perform. Due to the strength of the company’s balance sheet, we believe it can survive the current market environment and will keep an eye on how the management team is able to turn the trend around.
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