Canopy Growth Analysts Applaud Q3 Report, Stock Rallies: 'Revenue Momentum Has Returned'

Shares of cannabis company Canopy Growth Corp CGC WEED soared on Friday in New York and Toronto after the company reported a big third-quarter revenue and profit improvement.

Two analysts maintained Buy ratings on the stock — and said the beat could help the sector as a whole.

The Canopy Growth Analysts

BofA Securities analyst Christopher Carey maintained a Buy rating on the New York-listed Canopy Growth stock with a $36 price target.

Cantor Fitzgerald's Pablo Zuanic maintained a Neutral on the Toronto-listed stock with a CA$27 ($20.38) target price. 

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The Canopy Growth Takeaways

Investor and analyst expectations around the cannabis market had to undergo a serious reset over the last several months, with stocks dropping from their massive highs after listing in the early days of legalization. 

But BofA's Carey said investor expectations had risen for a sales beat from Canopy Growth, a giant of the sector.

The beat is likely to give the Street the feeling that "Canopy's revenue momentum has returned," though with a sharper eye on costs, the analyst said in a Thursday note.

Canopy still has plenty of room for cuts to operating expenses, especially in sales and marketing, he said, adding that sustaining the stock's momentum will depend in part on the company's plans for continued cost reduction.

Cantor Fitzgerald's Zuanic gave Canopy Growth credit for the cost-cutting it has already begun, noting that EBITDA improvements were due to operating leverage, gross margins and lower operating expenses.

The analyst also pointed out the company's press release mentioned "tighter cost controls" across the organization and efforts to reduce stock-based compensation.

Canopy Growth Price Action

U.S.-listed Canopy Growth shares were up 15.42% at $22.53 at the time of publication.

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