Canopy Growth: Is there more room for growth in WEED stock?

Stocks of Canopy Growth Corporation (TSX: WEED) closed at C$24.93 on Thursday, July 22, down nearly 3 per cent.

The stock is nearly 65 per cent below its 52-week high of C$ 71.70 (February 10, 2021) and nearly 36 per cent above its 52-week low of C$ 18.44 (October 02, 2020), indicating an entry point for investors.

WEED stock went down nearly 24 per cent in last three months and only jumped by 8 per cent over the past year.

Canopy Growth’s financials & fundamentals

The company posted net revenue of C$ 148 million in Q4 FY2021, an increase of 38 per cent a year-over-year (YoY) basis. Out of the total revenue, the cannabis revenue grew by 27 per cent which stood at C$ 101 million in Q4 FY2021.

Some non-cash expenses led to net loss of C$ 617 million for this quarter. However, the net loss narrowed from C$ 710 million same quarter last year.

On the valuation front, the company has a price-to-book (P/B) ratio of 2.81x and Debt-to-Equity (D/E) ratio of 0.49x.

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WEED Stock: Buy call?

Canopy Growth has a steady foothold in Canada but is yet to reap gains from US markets. The stock is also listed on NASDAQ, trading under ticker ‘CGC’.

It acquired Ontario-based cannabis brand AV Cannabis Inc. in April this year to scale up and expand ready-to-enjoy products recreational cannabis line among millennials.

The company has maintained its leadership position in the flower segment of the Canadian recreational market. It captured a market share of 10.9 per cent in the premium flower segment in the fourth quarter of FY2021.

In Q3 FY2021, Canopy Growth launched Tweed Iced Tea – a cannabis-infused beverage available in multiple flavours. This has enabled the firm to lay a strong foothold in the fast-expanding beverages segment in the Canadian recreational cannabis market.

The consumer products division benefitted from organic growth in sales on its e-commerce platform and the hand sanitizers, which were launched in the UK and US.

The company is targeting more than 40 per cent revenue growth in the next three years.

With the US government aiming to legalize weed at federal level, the stock could be poised for a boom phase.

Canopy Growth is a potential growth stock for investors interested in adding cannabis scrips to their portfolio. However, this is just a preliminary view and investors must further evaluate the stock from an investment perspective.

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