If the COVID-19 pandemic taught investors anything, it’s ignore the past and focus on the future. That’s why it’s so perplexing that cannabis investors dumped Canopy Growth Stock (TSE:WEED)(NYSE:CGC) after FQ4 results. The quarter was the first one under new CEO David Klein. It’s not fair to judge him based on what was put in place prior to his arrival. Taking a closer look, there’s a lot to like with Canopy Growth stock at current levels.
In looking at Canopy Growth stock chart, there’s trendline support at $15 and trendline resistance at $21. We believe the $15 level will hold and cannabis investors can buy dips off that support zone. A move above $21 opens the door for a move to $25 and above there a move to $30. With 21% of the float short, a move to $30 can happen much faster than investors realize.
About Canopy Growth Stock
First up, here’s a little background info on Canopy Growth stock for those that aren’t familiar with the stock. Canopy Growth Corporation , together with its subsidiaries, engages in engages in production, distribution, and sale of cannabis in Canada. It operates through two segments, Cannabis Operations and Canopy Rivers. The company’s products include dried flowers, oils and concentrates, softgel capsules, and hemps. It offers its products under the Tweed, Spectrum, DNA Genetics, CraftGrow, Tokyo Smoke, DOJA, Van der Pop, and Maitri brands. The company also provides growth capital and a strategic support platform that pursues investment opportunities in the global cannabis sector. Canopy Growth Corporation has a clinical research partnership with NEEKA Health Canada to investigate the efficacy of cannabinoids for the treatment of post-concussion neurological diseases in former NHL players; partnership with Parent Action on Drugs; and a collaboration with Cure Pharmaceutical Holding Corp. for the development of low-dose cannabidiol oral thin films. The company was formerly known as Tweed Marijuana Inc. and changed its name to Canopy Growth Corporation in September 2015. Canopy Growth Corporation is headquartered in Smiths Falls, Canada.
Canopy Growth Stock FQ4 Results
Here are the highlights from Canopy Growth stock FQ earnings report.
- Revenues: C$107.9M (+14.7%); recreational cannabis revenue (business to business): C$36.7M (-36%).
- Net loss: (C$1,303M) (-243.3%); loss/share: (C$3.72) (-238.2%).
- CF consumption: (C$772.6M) (-44.4%).
- Non-GAAP EBITDA: (C$102M) (-8%).
- In connection with organizational and strategic review, CGC recorded impairment and restructuring charges of $743M; the majority of which are non-cash charges.
- Generated Net Revenue of $399 million in FY 2020, up 76% over FY 2019
- Gross Margin of (85)% in Q4 FY2020; excluding restructuring and other charges, achieved Adjusted Gross Margin of 42%
FQ4 Earnings Analysis
While the stock sold off, digging deeper and there’s a lot to like. First, CGC got rid of whatever write-downs they needed to do, next earnings report will be much better. Second, CGC debt still under control, but the cash burn seems overdone. As we are aware, the new CEO was CFO at Constellation Brands (NYSE:STZ) before moving to CGC so cost control is in his nature. As CEO David Klein pointed out:
“I am excited to implement our strategy reset and organization redesign over the course of fiscal 2021. We have a renewed strategic focus and a clear change agenda that is already underway. We are building what we believe is the best cannabis company in the world by putting the consumer at the heart of everything we do and are re-aligning our organization to be faster and more agile.”
Bottom line is that Klein has to clean up Linton’s mess. Better days are ahead. Klein ripped the bandage off and got all the bad news out in this quarter.
Bullish Cannabis News
Last month, Statistics Canada reported that cannabis sales skyrocketed in March. Bank of America also came out with a Buy rating on industry giant Canopy Growth Corp (NYSE:CGC). In addition, the NY Post was out with a story that a team of Canadian scientists believes it has found strong strains of cannabis that could help prevent or treat coronavirus infections. Furthermore, NY Governor Cuomo is looking legalize marijuana sales. He has included legalization in the last two annual state budgets but has yet to cross the finish line. All of this has contributed to the bullish enthusiasm surrounding the pot sector.
Currently trading with a market cap of $6.4 billion, Canopy Growth stock is an exciting play in pot land. We believe overall market sentiments have changed and we are about to embark on a new epic bull run for cannabis names. With its market-leading position and top-quality assets, Canopy Growth looks set to lead the way. Canopy Growth stock is one name that belongs in every cannabis investor’s portfolio.
Good luck to all (except the shorts)!
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Disclosure: We have no position in any of the stocks mentioned and have not been compensated for this article.