Analyst: Canopy growth to drop 38% to $ 27

Investors may be high on marijuana stocks these days, but one notable analyst isn’t exactly bullish on one of the biggest names in the industry.

Piper Sandler’s Michael Lavery cut his recommendation on the industry barometer on Friday Canopy growth (NASDAQ: CGC) from overweight to neutrality. He maintains his price target of $ 27 per share, which means he believes the stock could fall almost 40% from its current level.

Image source: Getty Images.

Lavery pointed out that Canopy Growth is up 215% since October, an increase due to the likelihood that marijuana will soon be legalized in the United States. He tempered the enthusiasm for the prospect, believing that such a change in status is still two to four years one way. Many marijuana investors, encouraged by recent statements by powerful senators, believe it could happen this year.

Although Canopy Growth is based in Canada, it has made deals to buy stakes in US companies. Area of ​​assets and Canadian peer TerrAscend (which has operations in New Jersey and California). These agreements, however, depend on the United States. change the legal status of marijuana.

Meanwhile, the tipster pointed out that Canopy Growth shares are trading at 21 times the company’s estimated sales for the year 2022, making the company extremely expensive on that basis. He doesn’t think the fundamentals of the company justify such a high number.

Investors will get a glimpse of Lavery’s movement accuracy on Tuesday, when Canopy Growth releases its third quarter fiscal 2021 results ahead of the market opening.

Some are probably expecting the company to release some encouraging numbers. On Monday, Canopy Growth stock closed up 2.2%, eclipsing the 0.7% increase in the S&P 500 index.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

About Quinton Walls

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