Canopy Growth (NASDAQ: CGC) has been a popular choice among investors seeking to capitalize on the cannabis legalization trend. However, the company’s stock has experienced a decline since the spring’s rescheduling rally for marijuana stocks, falling back below $1 per share.
Despite this, one sell-side analyst, Bill Kirk from Roth Capital Partners, remains bullish on Canopy Growth’s prospects. In a research note dated June 16, Kirk reiterated his buy rating and per-share price target of 5 Canadian dollars on Canopy Growth.
This price target is significantly higher than the current average analyst price target of $1.22 per share, which is about 27% above Canopy’s U.S. share price. Kirk’s optimistic forecast is based on his belief that the company will deliver a record adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) during its recently completed fiscal fourth quarter, if not for one-time expenses.
Reasons Behind Kirk’s Forecast
Kirk cites several factors that support his forecast, including improved market share, further cost-reduction efforts, and reduced future shareholder dilution. He also notes that Canopy Growth has made significant progress in expanding its product offerings and distribution channels.
However, it’s worth noting that Kirk’s forecast assumes modest revenue growth of around 5.1% in FY2027 and adjusted EBITDA near breakeven. While this may be enough to send the stock modestly higher, it’s unlikely to result in a 4X gain.
Another point to consider is that there are other marijuana stocks with stronger fundamentals and legalization catalysts, such as already profitable U.S.-based cannabis companies licensed at the state level.
Should You Buy Canopy Growth Stock?
Before making a decision, it’s essential to weigh the pros and cons of investing in Canopy Growth. While the company has made significant progress in recent years, its stock has experienced volatility, and its future prospects are uncertain.
It’s also worth noting that the Motley Fool’s Stock Advisor analyst team has identified 10 top stocks for investors to buy now, and Canopy Growth was not among them. The recommended stocks have a track record of long-term growth and could potentially produce monster returns in the coming years.
