Canopy Growth CGC stock Forecast & Analysis

After its recent financial statement release, Canopy Growth CGC stock has moved higher and I wanted to put together the Canopy Growth CGC stock forecast to answer the question: Is Canopy Growth CGC stock a good investment?  Canopy Growth financial numbers saw some increases.  But, Canopy Growth remains eons away from profitability.  Still, despite that, it begs to question if this could also be an opportunity to invest in this cannabis company.  These are ideas I have looked at throughout the CGC Stock Forum & Discussion.

Canopy Growth CGC stock was one of the largest cannabis companies by market capitalization.  They received a $4B cash investment back in 2018 from Constellation Brands. This is where a lot of the hype for the company was driven.  With $4B in cash, a company should grow into something amazing, right?  One would have rationalized that until the cows came home.  As it turned out, Canopy Growth built up a massive company complete with all of the corporate niceties necessary, as well as grow facilities, and even created an investment arm to invest in other cannabis companies.  But, one thing that Canopy Growth has not been able to produce consistently upwardly increasing revenues and the requisite gross margins for profitability.

But, I still wonder: Could this be the turning point of a long journey upwards?

Here is my rationale: Canopy Growth has largely been through the wringer with how horribly it has performed.  Given that, they have learned considerable about what would succeed.  Plus, Canopy Growth still has plenty of cash.  If they continually downsized corporate costs while were able to drive up revenues, maybe there is value here?

Looking at the numbers shows why at this point, CGC stock would be a ‘last consideration’ as an investment into a company for me.

How to Lose $2 Billion

Despite the near 70% increase in revenue, Canopy Growth has taken a loss for this quarter.  This is significant and if Canopy Growth can continue with its revenue increases this puts the behemoth in a position to become profitable.  But, that is a long ways off.  For now, Canopy Growth has taken a $2B write-off that was the company’s largest loss to date.

If revenues continue to climb then margins finally have the potential to increase and gain traction.  As it is in Q2, 2022, gross margins were still negative despite the $170M revenue off of the 70% QoQ increase.  Also, Canopy Growth is still printing 100% operating efficiencies.  This would mean that Canopy Growth needs to build up some $350M in future revenue just to achieve a level that is on par with far smaller companies on an operating efficiencies basis.

Canopy Growth also has plenty of cash on hand and if there is a significant increase in CGC Stock, along with other cannabis stocks such as TerrAscend (Canopy Growth owns shares of TRSSF stock), this will push total equity upward.

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Canopy Growth Latest Financial Release

Here is a breakdown of Canopy Growth Q3 financial data.

Canopy Growth Gross Profits

  • Canopy Growth Revenue

There was a narrowing in margin losses and this is where some of the euphoria came from that brought in some heavy buying of CGC last week. There has been a pause in the buying for now, but recent geo-political moves may make it so there is another round of market rallies.

In the meantime, the narrowing of margin losses shows there is a pathway forward. But, these incremental increases are falling short and leaving Canopy Growth behind. However, as they increase revenues, they will become more competitive.

Canopy Growth will get there, no doubt about that. But, it is long from where they should be. Still, cash, assets, & equity are solid and they will get there.

Canopy Growth Operating Profits

  • Canopy Growth Operating Costs

Operational costs are huge on a relative basis to revenues. Canopy became a super-company first then tried to figure out how to sell cannabis. They still haven’t gotten that down correctly. But, as revenues increase, this metric will improve. Any cannabis company that is ultra-competitive are hitting 30% – 35% efficiencies, meaning, Total Operating Costs divided over Total Revenue are only about 30% for the best performing, and there are several that come in well below that number.

Given that, Canopy Growth has a ways to go before they get there. But, if they continually drive down cost – they performed in this general direction this quarter – they can continue to inch towards profitability.

Canopy Growth EBTIDA & Net Profits

  • Canopy Growth EBITDA

Profitability is still a milestone many miles away. But, I fully believe that Canopy Growth will get there eventually. They have sufficient cash & equity to achieve that. But, the fact that they created such a massive company up front means achieve the goal of profitability is that much further ahead.

But, that day will come. In the meantime, I believe that Canopy Growth CGC stock will move much higher with any stock surge that may result in CGC stock heading higher, I think that once the dust settles on that move short sellers are likely to get in and sell CGC stock all over again. That will likely pull down all other cannabis stocks, once again.

But, eventually, even that play will be short as Canopy Growth gets to profitability and cannabis companies start performing more independently.

That is a ways off, however.

Canopy Growth Cash On Hand

  • Canopy Growth Cash on Hand

Canopy Growth has about $1.3B.  This, after initially sitting on $4B.  They have turned some of that cash into a solid amount of assets.  Still, the cash burn at this point is excessive.

Canopy is one of the top positioned cannabis companies from the standpoint of cash:debt ratio.  They have not had to take on too much debt at this point because of their cash position.

Expect other uses for their cash in the future as they move to increase their foundation.

Canopy Growth Total Equity

  • Canopy Growth Total Assets

Canopy Growth has ample total equity considering the amount of assets & cash that they have, and the limited debt on a percentage basis.  Canopy will always have access to capital and there should not be any issues there.

At the same time, I also see the potential that Canopy Growth starts to acquire its own future revenue growth by acquiring additional companies.  I fully expect that prior to becoming profitable, Canopy Growth will begin to invest in its future and become a world-class company that has avenues throughout the world.

There is still a great deal of M&A activity that we can expect moving forward.  I think Canopy Growth will get there as they turn their corner and get closer to EBTIDA profitability.

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Canopy Growth CGC Stock Forecast

Normally, I do a Discounted Cash Flow Statement but, I cannot do a CGC stock forecast because Canopy Growth is so far away from EBTIDA profitability that it would be impossible to predict this stock’s future.

Is Canopy Growth CGC Stock A Good Investment?

Canopy Growth CGC Stock Chart 8Aug22

For right now, Canopy Growth is a stock to avoid simply because it is so far away from profitability.  But, there will be a time when that changes.  Canopy is learning how to basically become the very best they can under very harsh circumstances.  They will use what they learn to get better and better at what they do.  This will mean that as revenues increase, Canopy will be better at optimizing its profits.  This will eventually lead to strong profitability.

For now, I believe we will see a big move upwards with cannabis stocks.  My fear is that afterward, CGC stock starts to sell off again, and this drags other cannabis stocks lower.  I am hopeful that there is a slow and gradual increase in the news that brings a cannabis stock surge and during that time, Canopy Growth gets closer and closer to EBITDA profitability.  Then, when Canopy Growth turns that corner, cannabis stocks may see continued increases based upon their own merits and not be dragged down by the likes of Canopy Growth.

Canopy Growth CGC Stock Financial Data

Canopy Growth CGC Stock Financial Statements

2 thoughts on “Canopy Growth CGC stock Forecast & Analysis

  1. Might want to keep in eye on this but the latest forecast – Canopy Growth has slashed roughly 800 jobs since March. The Canadian company, one of the highest-valued cannabis companies in the world, announced its third round of layoffs since last month. Canadian cannabis company Canopy Growth quietly announced on Wednesday that 200 jobs have been eliminated in Canada, the United States, and the United Kingdom in the course of restructuring departments.

    1. @mattpaul02yahoo-com 

      I heard it through the grapevine… and, maybe it was posted up on this message board at one point, but Canopy Growth cannot grow cannabis to save their lives; the reason they acquired Supreme so long ago.  They are the prime example of a money pit.  It’s too bad because so many retail investors bought into this dream.  

      The stock is getting hit today.  It will drag down so many other better-performing stocks, and that is why I hate this stock so much.  

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