At one point, Canopy Growth (CGC) was valued at $19 billion. The stock traded at over $50/share at its peak. But today? It sits at a mere $0.49/share. And as dramatic a fall from grace as this story already is, one analyst expects the true end is near.
Benchmark analyst Mike Hickey believes Canopy Growth is headed to zero – and cut his own price target on the stock to reflect that sentiment. He referenced the alarming cash burn going on internally, and the fact that operations would be hard-pressed to turn things around. It’s getting to the point where the company will have trouble meeting its financial obligations.
In Canopy’s most recent annual report, the firm noted a going concern about risk. And while expansion into the US market could be just what the Canadian company needs, this appears to be nothing more than an act of desperation. Given the fact that the US market is not only federally illegal still, but also riddled with domestic competition, it’s fair to believe little relief will be found here in the states for Canopy.
Another analyst, John Zamparo, echoed Hickey’s belief, saying that fear surrounding Canopy’s debt burden – and lack of cash coming in – is substantiated. He hasn’t taken as aggressive of a stance on the company’s future, but still cut his own price target 5 cents, down to $0.45/share.
This begs the question, if you’re currently invested in CGC, is it officially time for you to cut losses and move on? We’ve witnessed this stock tank by more than 86% in the last year alone. Much of that loss has come in the past 3 months – as the stock is down more than 73% in that timeframe. Even today in Tuesday morning’s trading session, the stock is down nearly 4%.
That being said, we’ve taken a look at CGC through the VectorVest stock analyzing software to help you determine your next move. Keep reading for a clear buy, sell, or hold recommendation on this stock.
While CGC Still Has Good Upside Potential, the Stock Has Very Poor Safety and Timing
The VectorVest system simplifies your approach to trading by giving you all the information you need to make confident, calculated decisions in 3 ratings. These are relative value (RV), relative safety (RS), and relative timing (RT).
Each of these ratings sits on a scale of 0.00-2.00, with 1.00 being the average. This makes interpretation quick and easy, allowing you to spend less time on analysis while winning more trades.
Or, better yet, simply follow the clear buy, sell, or hold recommendation VectorVest offers for any given stock, at any given time based on this proprietary stock rating system. Now, as for CGC, here’s what you need to know:
- Good Upside Potential: The RV rating compares a stock’s long-term price appreciation potential to AAA corporate bond rates & risk. And despite the dire situation this company finds itself in, it still has a good RV rating of 1.17. Moreover, the stock is undervalued at its price today - its current value is $0.94/share.
- Very Poor Safety: In terms of risk, though, this stock has very poor safety - as evidenced by the RS rating of 0.48. This is calculated through an analysis of the company’s financial consistency & predictability, debt-to-equity ratio, and business longevity.
- Very Poor Timing: The biggest issue for this stock right now is the very strong negative price trend that has continued to put downward pressure on price for most of this year so far. This trend is reflected in the very poor RT rating of 0.07 - which is just about as bad as it gets. This rating is based on the direction, dynamics, and magnitude of the stock’s price movement day over day, week over week, quarter over year, and year over year.
The overall VST rating of 0.68 is poor for CGC - is it enough to justify cutting losses and moving onto the next opportunity though? Don’t let emotion influence your decision-making with this stock. Get a clear answer on your next move with Canopy Growth through a free stock analysis at VectorVest today.
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VectorVest advocates buying safe, undervalued stocks, rising in price. As for CGC, the stock is burdened with debt and cash flow problems. While the upside potential is good, the safety is very poor - and the timing is even worse.
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