Canopy Growth is still wildly undervalued, this analyst says

Roth Capital Markets analyst Bill Kirk maintained his “Buy” rating and C$8.00 price target on Canopy Growth (Canopy Growth Stock Quote, Chart, News, Analysts, Financials TSX:WEED) in a Dec. 16 report, following the company’s announced acquisition of Montreal-based MTL Cannabis.

Canopy said it will acquire MTL for total consideration of approximately C$125-million, implying an enterprise value of C$179-million, in a transaction that Kirk said meaningfully strengthens Canopy’s position in both the Canadian medical and adult-use markets. Post-transaction, the combined company is expected to increase its share of the medical cannabis market while approaching a top-five position in adult-use.

MTL operates with a focus on high-THC products and quality-driven cultivation infrastructure, generating gross margins above 50%, positive free cash flow and incremental EBITDA, though Kirk noted growth has recently slowed. He said MTL stands to benefit from Canopy’s national distribution platform, while Canopy gains access to improved product quality for core brands such as Tweed.

“While Claybourne has a presence in the premium vape and pre-roll segments, MTL brings its leading upper-mainstream flower, pre-roll and edible/concentrate offering to round out Canopy’s menu,” Kirk said. Brightfield data shows MTL holds the top upper-mainstream flower market share in Canada and ranks fourth in pre-rolls, with a particularly strong presence in Quebec.

Canopy plans to retain key members of MTL’s management team to support the expansion of hash and pre-roll products into British Columbia, Alberta and Ontario, maintain and improve operations at MTL’s two Quebec cultivation and production facilities, and leverage the broader platform to support growing international demand.

MTL generated trailing-12-month net sales of C$83-million through September, on gross sales of C$105.2-million, with gross margins of roughly 51%. In fiscal 2025, MTL delivered C$20.3-million in Adjusted EBITDA, though year-to-date results point to margin pressure, with first-half fiscal 2026 Adjusted EBITDA of C$5.3-million, down from C$10.1-million a year earlier. Net revenue was down 1% year-over-year in the same period.

Canopy expects to realize approximately C$10-million in annualized synergies within 18 months of closing. Based on trailing results, the transaction implies an EV-to-EBITDA multiple of roughly 12 times, falling to about seven times post-synergies. On a run-rate basis, the multiple rises to roughly 18 times pre-synergies and nine times post-synergies.

Under the terms of the deal, MTL shareholders will receive 0.32 of a Canopy share plus C$0.144 in cash per MTL share, equating to approximately 43.8 million Canopy shares and C$20-million in cash consideration. The transaction represents an estimated 45% premium to MTL’s prior trading price and is expected to close in February 2026. The roughly 85% equity and 15% cash structure preserves Canopy’s liquidity but results in approximately 18% dilution to existing shareholders.

Kirk said the transaction should move Canopy closer to EBITDA breakeven once integrated and views the valuation as a relevant upside comparable for peers such as Aurora Cannabis.

Canopy Growth, headquartered in Smiths Falls, Ont., produces and sells medical cannabis and cannabinoid-based consumer products in Canada and internationally, with brands including Tweed, Storz & Bickel, This Works and BioSteel.

Kirk forecasts Canopy will generate C$285.5-million in revenue and negative C$10.9-million in Adjusted EBITDA in fiscal 2026, before returning to profitability in fiscal 2027 with C$298.2-million in revenue and C$37.8-million in Adjusted EBITDA.

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