Canopy Growth Corp (TSX:WEED)(NYSE:CGC) has declined 13% in just the past month and was down 5% on Thursday as it closed under $54 a share. The last time the stock has closed this low was back in early January, but back then it was headed in the opposite direction.
Although nothing adverse has happened to Canopy Growth recently, the stock did receive a downgrade from Scotiabank, which is a bit skeptical about the company’s potential revenue growth. And that shouldn’t come as a big surprise as the company has missed on revenues in the past and optimism for the industry is simply too high. Research firm BDS Analytics recently scaled back its expectations for the industry’s growth in Canada, as it too sees too many obstacles in the country for the best-case scenario to play out.
Over the past 12 months, Canopy Growth generated $155 million in revenue. However, with a market cap of around $18.3 billion, investors are still paying a whopping 118 times sales for the company today. There’s no denying that Canopy Growth is still an expensive stock even with the drop in price.
There are still opportunities for the company to bounce back. Investors have shown a willingness to pay a premium for the country’s top pot stock. And with the legalization of edibles expected to come within the next six months, I’d also expect to see some beverage product unveiled between now and then, which could give the stock a big boost. Although Canopy Growth has been struggling lately, I wouldn’t be surprised to see it rally back up to over $60 before the year is over.
