BofA Says Canopy Stock Is 'A Show Me Story,' Lowers Price Target

Canopy Growth Corporation CGC entered into an additional privately negotiated exchange agreement on Friday with a holder of the company's outstanding 4.25% unsecured senior notes due in 2023, to acquire approximately CA$7.25 million ($5.6 million) aggregate principal amount of the notes from the noteholders in exchange for common shares of the company and approximately CA$140,000 ($110,000) in cash for accrued and unpaid interest.

The news comes on the heels of Canopy expanding its cannabis beverage portfolio, launching its new Just Hits Different brand campaign and entering into exchange agreements with holders of approximately $198 million of convertible notes. The latter sent the stock down 21.7%. 

Year-to-date, the stock declined by 70.75%. 

The Analyst

BofA’s Lisa K. Lewandowski lowered the price target on Canopy’s stock to $2.33 from $4.77, keeping an ‘Underperform’ rating. 

The Thesis 

The analyst lowered the price target to address a decline in sales at Storz & Bickel (vaporizes) due to the inflationary pressures on food, fuel, and other everyday products. “The other half of the decline is driven by slightly softer Canadian adult-use sales and rightsizing of our BioSteel beverage forecasts,” Lewandowski noted.

Another reason to maintain an ‘underperform’ rating on Canopy’s stock is the lack of U.S. Congressional progress on marijuana legalizations.

“It appears there remains an appetite for cannabis reform, but the breadth of reform remains fluid and likely narrowed given limited support for broad-based reform,” the analyst said. According to Lewandowski, progress is unlikely until the mid-term elections in early November.

“We think of Canopy as a show me story given its limited success in rightsizing the company to date. We think Canopy’s premium to peers is appropriate given Canopy’s cash position and advanced US entry plan,” the analyst concluded.

The Price Action 

Canopy Growth’s shares traded 1.40% lower at $2.8 per share at the time of writing Friday morning.

Photo: Courtesy of Jeff W on Unsplash

Posted In: BofALisa K. LewandowskiAnalyst ColorCannabisNewsPenny StocksSmall CapMarketsAnalyst Ratings

Ad Disclosure: The rate information is obtained by Bankrate from the listed institutions. Bankrate cannot guaranty the accuracy or availability of any rates shown above. Institutions may have different rates on their own websites than those posted on The listings that appear on this page are from companies from which this website receives compensation, which may impact how, where, and in what order products appear. This table does not include all companies or all available products.

All rates are subject to change without notice and may vary depending on location. These quotes are from banks, thrifts, and credit unions, some of whom have paid for a link to their own Web site where you can find additional information. Those with a paid link are our Advertisers. Those without a paid link are listings we obtain to improve the consumer shopping experience and are not Advertisers. To receive the rate from an Advertiser, please identify yourself as a Bankrate customer. Bank and thrift deposits are insured by the Federal Deposit Insurance Corp. Credit union deposits are insured by the National Credit Union Administration.

Consumer Satisfaction: Bankrate attempts to verify the accuracy and availability of its Advertisers' terms through its quality assurance process and requires Advertisers to agree to our Terms and Conditions and to adhere to our Quality Control Program. If you believe that you have received an inaccurate quote or are otherwise not satisfied with the services provided to you by the institution you choose, please click here.

Rate collection and criteria: Click here for more information on rate collection and criteria.