Canopy Growth (CGC) (WEED) received optimistic views from analysts on Monday. The stock, which otherwise struggled, saw some light. Seaport Global Securities upgraded the stock to "buy" from "neutral." The stock closed 0.6% higher on Monday. Recently, impressive earnings did not have a negative impact on the stock.
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Seaport upgraded Canopy Growth
Seaport Global upgraded Canopy Growth because the company was an" attractive "growth opportunity. According to CNBC on Monday, Seaport analyst Brett Hundley at Canopy Growth could get a boost from Canada's "2.0 market" in cannabis The CNBC article explained that the 2.0 market reflects Canada's plan to add cannabis manufacturers to various new products, including edibles, popular vape and infused beverages. sold legally later this year.
According to an article by Stock Sharks on Monday, Hundley believes Canopy Growth can still be a safety bet. He said, "Canopy stands out in the cannabis crowd as it can utilizing R&D, IP and partnerships to provide consumers with compelling value-added products. "
He also emphasized that Canopy Growth has an attractive balance sheet. The company should seek investments that create a value multiplier of six times or more. He gave a target price of $ 31 to the stock, representing a potential upside of 24.5% from the closing price on August 23.
Canopy Growth's results were disappointing
Canopy Growth posted disappointing results in the first quarter. The company missed the expectations of the top line and the bottom line. The results from Canopy Growth pulled the stock down. As a result, many other shares followed suit. As of Monday, the stock has fallen 8.4% since the company reported earnings. Cronos Group (CRON) reported second quarter results. The company's revenues increased in the second quarter and exceeded the guidance. However, Cronos Group had large operating deficits in the second quarter, which took a toll on the share price. The stock fell 16.4% in August. So far, the stock has increased 11.0% YTD (so far this year).
Constellation Brands books loss in Canopy Growth
Constellation Brands (STZ) is the largest shareholder in Canopy Growth. The company invested in Canopy Growth last year. The cannabis industry is growing. In addition, cannabis products are expanding. However, Canopy Growth's dismal results in the quarter posted losses for Constellation Brands. The company suffered net losses of $ 245 million in the last quarter. Constellation Brands management is optimistic about the cannabis partner. Constellation Brands & CFO David Klein said the company is pleased with Canopy Growth's investment in Storz & Bickel. The management is pleased with Canopy Growth's acquisition of Acreage. Constellation Brands expects to help Canopy Growth achieve a leading position in the United States following federal cannabis reform. Overall, Constellation Brand remains loyal to its Canopy Growth investment.
A Quartz article July 3 mentioned that despite the losses, Canopy Growth generates investor confidence. The company's New York hemp plant can boost the US cannabis market.
What was a challenge for cannabis players?
The Canopy Growth stock received positive recommendations from Jim Cramer, CNBC's Mad Money host, in August. He believes that Canopy Growth and the Cronos Group have good growth potential. Last week, Cramer changed his views and recommended Cronos Group and Aphria. Cramer changed its mind about Canopy Growth after the results in the last quarter.
No doubt that regulatory concerns pose a challenge for cannabis players. Many cannabis players suffered because of their involvement in regulatory scandals. Many key executives have left companies because of regulatory scandals. For example, CannTrust (CTST) (TRST) fired its CEO, Peter Aceto, who knew about the violations. The company's chairman, Eric Paul, was asked to resign because of regulatory scandals. Similarly, Aphria (APHA) was engulfed by allegations of investment in South America. The company's chief executive, Vic Neufeld, resigned because of the allegations. CannTrust has fallen 24.6%, while Aphria has risen 19.1% in August. CannTrust has dropped 63.2%, while Aphria has achieved 12.6% YTD.
Bruce Linton's CEO and co-founder, Bruce Linton, also stepped down last month. However, he said it was a closing decision from Constellation Brands – the company's largest shareholder. The stock has lost 6.8% YTD. The company may be able to revive itself. We have to wait for the third quarter result. Canopy Growth is scheduled to release its third quarter results in November.
Legalizing marijuana at the federal level can also be beneficial to companies. Some presidential candidates support cannabis legalization. The White House is also heating up the legalization of cannabis. Read Marijuana and the Trade War: Will the Democrats' Agenda Be Intensified? and Marijuana Legalization: Does the White House Heat? to learn more.