Canopy Growth (NYSE: CGC) stock price has lost substantial value in the past couple of months amid lower than expected growth from the entire marijuana industry.
Some investors believe the emerging industry was overhyped and the selloff has helped in correcting the valuations. CGS shares lost more than 70% of value since the beginning of this year.
Fortunately, analysts started suggesting buying pot stocks amid a huge share price selloff. In addition, the passage of a pot decriminalization bill from the House Judiciary Committee could help in ending the bearish trend.
BofA Suggests to Buy Canopy Growth Stock Price on Dip
Bank of America is among the bulls that see upside potential for the largest company in the cannabis industry. BofA analyst Christopher Carey provided a Buy rating for CGC stock.
The analyst says, “With the stock off some 70% over the past few months, the valuation is at a minimum more reasonable.” The analyst believes CGC is in a position to beat the consensus estimates.
Market analysts are of the opinion that the emerging industry has hit the bottom; it is now setting the footholds for a bounce back. The decriminalization of marijuana at a federal level could help the entire industry to grow at a better rate.
Q2 Results Highlighted Headwinds
Canopy Growth has generated net revenue of C$76.6M in the second quarter. This represents growth of 229% year over year but revenue was down 15% sequentially.
The revenue decline from the previous quarter is a clear indication of headwinds for the largest cannabis company. Market pundits believe higher supplies compared to demand has negatively impacted revenues. They claim producers have ramped up capacity when the demand remains soft.
Moreover, its operating expenses also declined by 15% sequentially. The company reported a net loss of C$374.6 million in the second quarter, up 13% from the first quarter this year. The company is likely to report soft financial numbers for the third quarter. However, analysts believe the Canopy Growth stock price has a limited downside from the current level.
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