As the cannabis industry changes and evolves, it’s inevitable to see management changes, high profile executives getting fired and other exciting news. For the world’s largest cannabis company by market cap, Canopy Growth (CGC) has seen its fair share of shake-ups in the past few months, along with a whole lot of share price volatility. So far in 2019 Canopy growth has seen highs of $76 only to fall more than 50% hitting lows of $30 per share for multiple reasons. The company has been on a downward trajectory for multiple reasons but the main reason has been profitability, and they look to be moving in the wrong direction to please investors.
After Canopy’s recent quarter the company announced that they lost over $1 billion dollars, which is far from profitability, especially in a market where investor sentiment is deteriorating and many investors want to see an immediate push towards profitability. Now we can keep talking about this every day or we can come up with a strategy on how to address this situation in the market.
Some recent news that came out was almost a double whammy for Canopy Growth shares and the company is looking like it is losing some of the recent momentum that it looked to be gaining back. Multiple bearish articles hit the news recently outlining the dangers for Canopy growth and the fact that the company may continue to lose money in the quarters to come. As bearish sentiment piles on this is never good for a stock in the short term, but to add to the negativity was the fact that Bruce Linton, former CEO and Co-Founder at Canopy Growth has just landed a new job. Bruce Linton will now be a strategic advisor for Better Choice Company (OTC: BTTR) which specializes in pet CBD products. Some may see this as a coincidence but others may feel that Bruce has finally moved on from his beloved Canopy Growth.
As the market changes and large capital investments pour in, we come to a crossroads. Multiple conflicting opinions, stakeholders who are looking for short term gains while visionaries want to maintain their long term investment strategies, things can get pretty hectic. For Canopy right now we view the company as a very rich teenager with a boatload of money from his parents and little direction as to where he wants to spend it.
What we want to see Canopy do, and this is something that we feel is most important right now is, we want to see the company reinstill trust and provide further transparency. We need management to focus on a specific strategy, streamline their business and show improving numbers. It’s very easy to say that Canopy Growth is a buy when the stock is trading close to $30 because it’s down 50% so far but is it really a great buy? As momentum fades and Canopy looks to retest its recent lows, we will see how long it takes the company to get their act together, and at what expense for that matter.
(Disclaimer: The author owns shares of Canopy Growth)
CGC shares were trading at $25.25 per share on Friday morning, down $1.09 (-4.14%). Year-to-date, CGC has declined -6.03%, versus a 21.14% rise in the benchmark S&P 500 index during the same period.
About the Author: Aaron Missere
Aaron is an experienced investor who is also the CEO of Departures Capital. His primary focus is on the cannabis industry. He also hosts a weekly show on YouTube about marijuana stocks. Learn more about Aaron’s background, along with links to his most recent articles. More...