Shares of Canopy Growth (TSX:WEED) reached all-time highs in October 2018 but have since plummeted by 98.6%. The Canadian cannabis sector has faced challenges such as rising competition, oversupply, high inventory levels, and negative profit margins. To support their cash-burn rates, marijuana producers raised equity capital, diluting shareholder wealth. Overvalued acquisitions led to billions of dollars in goodwill impairments.
With a market cap of $911 million, Canopy Growth stock has experienced significant losses. In fiscal 2024, the company reported a net loss of $675.8 million on sales of $297.1 million. Operating losses exceeded sales, indicating a lack of profitability. Although Canopy Growth reduced its losses, it still faces a cash outflow of $282 million in 2024.
The potential legalization of marijuana in the United States has boosted cannabis stocks, including Canopy Growth, which has seen a 40% increase in share price in 2024. Canopy Growth created Canopy USA to enter the U.S. market, acquiring companies like Acreage Holdings, Jetty Extracts, and Wana Brands. However, competition from established multi-state operators like Green Thumb and Cresco Labs poses a challenge.
Analysts predict Canopy Growth will narrow its loss per share from $8.79 in 2024 to $1.71 in 2025 and $1.21 in 2026. The 12-month average target price for WEED stock is $9.13, slightly higher than the current price of $8.90. While losses are expected to decrease, Canopy Growth is still a few quarters away from profitability. Investors may find better investment options in fundamentally strong stocks in 2024.