The US President signed the first standalone marijuana research bill into law last week. Although Joe Biden remains opposed to the federal legalisation of cannabis, he is beginning to introduce reforms (including promoting research, decriminalisation, or reclassifying cannabis) that could relax the law. What impact might this have on Canopy Growth (CanopyGrowth)?
Canopy Crowth and Nasdaq IPO
Canopy Growth Corporation is a Canadian company engaged in the production and distribution of cannabis and cannabis-infused products. The company specialises in research into the medicinal use of cannabis and the production of medical cannabis. Canopy Growth operates in global markets and is one of the leaders in this industry. From the company's latest financial report we learn: "Announced comprehensive plan to fast track entry into the U.S. cannabis market through the creation of a new U.S. domiciled holding company, Canopy USA, LLC (“Canopy USA”) which is expected to accelerate growth and market expansion."
Today (Monday, 12 December), the company will ring the opening bell on the Nasdaq exchange in New York, and its shares will be listed on that floor. "This is an exciting time for Canopy Growth as we take important steps to realize our goal of building a leading North American cannabis company. We appreciate the continued support of all of our stakeholders as we take ambitious strides towards unleashing the power of cannabis" - David Klein, CEO of Canopy Growth, said. It appears that the new capital could assist the company in entering and growing in the US market.
Company's difficult financial situation
From its latest financial report, we could learn that the company's revenue fell by 13.46% year-on-year, with 63% of its sales took place in Canada. Recall that as of 2018, the sale of this type of stimulant is legal in this country. However, the results from operations, in which the loss seems to have been growing continuously since 2017, appear to be uninteresting.
The company's total debt is US$1.3 billion, giving it a debt-to-all-assets ratio of 0.83. We could interpret this that the company is 83 per cent made up of all forms of debt. It has as much as US$883 million in cash, which represents 33 percent of its assets. These funds could be used to invest in new markets, but currently appear to have been used to maintain liquidity in the business.
At present, the company appears to have profitability problems and has to be financed with borrowed funds. It seems that a change in this state of affairs could be brought by the spread of such drugs on the American market, but the legalisation and spread of cannabis seems to be still a matter of conjecture for the future.
What does Wall Street think of Canopy Growth's share price?
According to the Market Screener portal, the company has 20 recommendations, and among them the predominant ones are those with the contents: "Hold" and "Reduce". The average target price is set at USD 3.66, 27 per cent higher than the last closing price. The highest target price is at USD 10.22 and the lowest is USD 1.53.
Source: Conotoxia MT5, CanopyGrowth, Daily
Grzegorz Dróżdż, Junior Market Analyst of Conotoxia Ltd. (Conotoxia investment service)
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75,21% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Trade this news from Conotoxia Ltd. platforms
Go to your account
