The stock may still be lost in the weeds but Roth Capital Partners analyst Bill Kirk sees sunnier days ahead for Canadian cannabis play Canopy Growth Corp (Canopy Growth Stock Quote, Charts, News, Analysts, Financials TSX:WEED). Kirk renewed a “Buy” rating on Canopy and $11.00 target price in a Thursday update, which at press time represented a projected one-year return of 200 per cent.
Canopy shares dropped sharply on Thursday as the market received the company’s just-issued third quarter fiscal 2023 financials for the quarter ended December 31. Canopy’s net sales dropped 28 per cent year-over-year to $101.2 million and adjusted EBITDA fell 30 per cent to negative $87.5 million. The company’s free cash flow was up 13 per cent year-over-year to negative $145.8 million. Consensus expectations were for $116 million in revenue and negative $63 million in EBITDA.
Canopy said it would be pivoting to an asset-light model as far as its Canadian operations go, halting cultivation at its Smiths Falls facility and ending flower production at its Mirabel, Quebec, facility. Canopy said it will be using third-party producers for its lines of beverages, edibles, vapes and extracts. The result will be a reduction in headcount of 60 per cent, including 800 positions.
“Canopy must reach profitability to achieve our ambition of long-term North American cannabis market leadership. We are transforming our Canadian business to an asset-light model and significantly reducing the overall size of our organization. These changes are difficult but necessary to drive our business to profitability and growth,” Canopy CEO David Klein.
Commenting on the announcement and business update, Kirk said Canopy hopes to save $140-$160 million in annual costs, with management predicting positive adjusted EBITDA (aside from its BioSteel investment) in fiscal 2024, which starts in April. Kirk asserted that the company’s new focus will allow it to better match regions and brands with the best operational potential.
“Where previous forecasts of profitability relied on hope/growth, we think these are the rational/concrete actions that can deliver a better profit and loss. We maintain Canopy’s value will be generated in the U.S. and by brands like BioSteel, and believe this is the appropriate decision to maximize shareholder value,” Kirk wrote.
Going forward, Kirk is forecasting Canopy to deliver full fiscal 2023 revenue and EPS of $471.1 million and negative $1.07 per share, respectively.
Recent Canopy Growth News
In other news, on January 11, Canopy’s BioSteel Sports Nutrition division had big news. The company announced a series of multi-year partnerships with the National Hockey League (NHL®) and name the brand the new Official Sports Hydration Partner of six franchises: the Anaheim Ducks, Carolina Hurricanes, Chicago Blackhawks, Columbus Blue Jackets, Pittsburgh Penguins and Tampa Bay Lightning.
“BioSteel has been deeply imbedded in the hockey community since its inception, and when we secured the NHL deal last summer, we knew we wanted to deepen our connection with hockey fans through local partnerships and activations,” said Michael Cammalleri, Co-Founder of BioSteel. “Through each of these new team deals, we’re thrilled to have the opportunity to tell our story and introduce our premium hydration products to each of these franchises’ communities.”
Founded in 2009 by former NHL’er Cammalleri and his business partner John Celenza.
About Canopy Growth Corporation (TSX:WEED) (via ChatGPT)
Canopy Growth is a Canadian cannabis company that specializes in the production and distribution of medical and recreational cannabis products. The company was founded in 201, arising from the Tweed brand and is headquartered in Smiths Falls, Ontario.
Canopy Growth is one of the largest cannabis companies in the world, with operations in several countries including Canada, the United States, Germany, and the United Kingdom. The company’s products include dried cannabis, oils and concentrates, softgel capsules, and beverages.
In addition to its production and distribution operations, Canopy Growth is also involved in research and development initiatives aimed at advancing the understanding and application of cannabis-based medicines.
The company has experienced significant growth since its inception, driven in part by the legalization of recreational cannabis in Canada and the increasing acceptance of medical cannabis around the world. Canopy Growth has also made several high-profile partnerships and acquisitions, including a major investment from alcohol giant Constellation Brands.
In 2018, Canopy Growth announced a major investment from Constellation Brands, a leading producer and marketer of alcoholic beverages. Constellation Brands agreed to invest $4 billion CAD (approximately $3.8 billion USD) in Canopy Growth, representing a significant vote of confidence in the cannabis industry.
Under the terms of the agreement, Constellation Brands acquired a 38% stake in Canopy Growth, making it the largest shareholder in the company. The investment was intended to help Canopy Growth expand its operations and accelerate its growth, particularly in the area of cannabis-infused beverages.
As part of the deal, Constellation Brands also received the option to purchase additional shares in Canopy Growth in the future, which could increase its ownership stake in the company.
The investment from Constellation Brands was seen as a major milestone for the cannabis industry, as it represented a significant influx of capital from a major player in the alcoholic beverage industry. Many analysts saw the move as a signal that other large consumer goods companies may also be looking to enter the cannabis market in the coming years.