Over the past 12 months, Canopy Growth’s CGC shares have fallen by half.
The Analyst
Bank of America Merrill Lynch’s Christopher Carey reiterated a Neutral rating on Canopy Growth with a $23 price objective.
The Thesis
The risk-reward profile for Canopy's second-quarter looks much better than it did six weeks ago, Carey said in a Wednesday note. (See his track record here.)
Bank of America downgraded the stock Sept. 27.
The analyst predicts the company will reveal its new CEO when it reports second-quarter results Nov. 14.
That development, together with recently lowered estimates, could form a low bar, he said.
“Reiterate Neutral, on near-term execution risks and potentially lofty Street estimates, balanced by an industry leading balance sheet.”
The second-quarter consensus sales estimate is CA$102 million ($77.4 million) versus CA$97 million in the prior quarter, Carey said.
Bank of America is expecting a figure beneath the Street estimate: CA$94 million.
The Street's out-year estimates present a “best case scenario,” the analyst said.
"While we think that setup has improved for FQ220, we view sustainable upside in Canopy shares as challenging, particularly against a backdrop of Street estimates that we think are too high."
Price Action
Canopy Growth shares were up 0.7% at $20 at the time of publication.
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