Canopy Growth (TSX:WEED) is rising. Is the pot stock a safe bet?

Stocks of Canopy Growth Corporation (TSX:WEED) surged by about two per cent at market open on Tuesday, September 7, despite the lack of any official announcement from the company.

At the time of writing this, over 228,000 WEED shares had traded hands at the Toronto Stock Exchange (TSX) as investors turned their focus towards this cannabis stock.

Canopy Growth, known to be a major cannabis producer in the Canadian market, has noted quite a fall in its stock performance in the past few months. Despite a boom in cannabis sales during the COVID-19 pandemic, the stock appears to have failed to capitalize on the trend and attract investors.

On February 10 this year, WEED stock clocked a 52-week high of C$ 71.6 per share. Since then, its prices have dropped significantly.

At 10:30 AM EST on Tuesday morning, the cannabis producer's stock was trading at C$ 21.65 apiece.

Let's take a closer look at the fundamentals and stock performance of the company.

Canopy Growth Corporation (TSX:WEED)

In fiscal 2021, Canopy Growth's net loss increased to C$ 1.7 billion, up from C$ 1.4 billion in fiscal 2020. The cannabis producer incurred losses despite an increased revenue of C$ 607.2 million in FY 2021.

Canopy Growth released its financial results for the first quarter of fiscal 2022 last month, which displayed a robust performance in comparison to the same quarter of the previous year.

In Q1 2022, the company recorded revenues of C$ 155.4 million, up from C$ 119.1 million in Q1 2020. Canopy Growth posted a net income of C$ 389.95 million in the latest quarter, which was a significant improvement as against a loss of C$ 128.3 million in Q1 2021.

However, WEED stock has declined by 31 per cent year-to-date (YTD). It has secured a slight growth of two per cent in the last twelve months.

According to Refinitiv data, the difference between its close and 30-day simple moving average is a negative 6.7 per cent.

Also Read: 5 best TSX Cannabis stocks under C$25 to buy         

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Bottom line

Cannabis is expected to be legalized at the federal level in the US soon. Keeping this in mind, Canopy Growth seems to be better positioned in the market if and when this change happens.

The Ontario-based cannabis producer has the support of strong partners like Acreage Holdings and Constellation Brands in the US and the company could become more profitable in future as it has already shown growth in the first quarter of fiscal 2022.

Also Read: Why Is Canopy Growth (WEED) Acquiring Supreme Cannabis (FIRE)?

Earlier this year, Canopy completed acquisitions of two prominent cannabis brands, namely Ace Valley and Supreme Cannabis Company. The acquisitions are expected to expand its revenues from the recreational cannabis segment.