Canopy Growth: Buy, Sell or Hold?

Canopy Growth’s (Canopy Growth Corp Stock Quote, Chart, News, Analysts, Financials TSX:WEED) international cannabis revenue increased 141% in its fiscal second quarter, but changes to medical cannabis reimbursement programs in Canada continued to delay the company’s return to profitability.

In a Nov. 8 report, Roth Capital Partners analyst Bill Kirk maintained his “Buy” rating and C$5.00 target on the Smiths Falls, Ont.-based cannabis producer, arguing that international growth, improving production efficiency and reduced share dilution could support positive Adjusted EBITDA later this fiscal year.

“Canopy continues to expect positive EBITDA ‘during’ the year,” Kirk said. “We understand investors will be hesitant to underwrite positive EBITDA, but 2Q, under previous reimbursement structure, would have been positive.”

Canopy reported quarterly revenue of C$81.4-million, up 22% year-over-year and broadly in line with consensus of C$82.2-million. International cannabis revenue reached C$12.3-million, up 141%, driven primarily by stronger sales in Germany and Poland as product availability and distribution improved. Canadian adult-use cannabis revenue increased 17.5% to C$28.1-million, while medical cannabis revenue rose 18% to C$25.8-million.

However, Adjusted EBITDA remained negative at C$2.9-million, compared with a loss of C$3.2-million in the previous quarter. Consolidated adjusted gross margin was unchanged sequentially at 31%.

Kirk thinks international sales are particularly important because they generally generate higher prices than the Canadian market. International operations accounted for 18.5% of cannabis revenue, compared with 10% a year earlier. He also expects improvements at Canopy’s Kincardine cultivation facility to support margins. Ten of the facility’s 24 growing rooms have been converted to a new production system, with the remaining work expected to be completed by the beginning of fiscal 2028.

Management believes production could increase by at least 25% to 30% within the existing facility.

“With a reorganization that fosters more productive allocation of supply, Canopy should better capture the most profitable demand opportunities,” Kirk said.

The analyst also expects improved seasonal demand for Storz & Bickel products and approximately C$10-million in annualized efficiencies from the March 2026 acquisition of MTL Cannabis to support earnings. “Although breakeven adj. EBITDA remains stubbornly elusive, 2Q, even with its disruptions, continues to show inflection on the horizon,” Kirk said.

He contrasted Canopy’s recent results with fiscal 2022, when the company recorded approximately C$400-million in Adjusted EBITDA losses and negative gross margins of 35%. However, its U.S. operations remain a concern, particularly Acreage, as Canopy USA revenue declined to approximately US$266-million in fiscal 2026 from roughly US$300-million in 2023.

Kirk also said repeated share issuances have limited shareholder returns, although the company has not sold shares through its at-the-market financing program since December 2025.

“Heavy equity issuance/dilution made upside in shares very difficult, but after heavy usage in 2Q/3Q FY26, share count was ~flat q/q,” he said.

Kirk maintained his fiscal third-quarter forecast of C$84.3-million in revenue and positive Adjusted EBITDA of C$1.1-million. For fiscal 2027, he expects revenue of C$327.8-million, up slightly from his previous C$327.6-million estimate, and negative Adjusted EBITDA of C$2.5-million, compared with his earlier forecast of negative C$2.1-million.

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