Canopy Growth (NYSE: CGC) stock price plunged more than 40% in the last three months alone. The steep share price selloff is supported by negative analyst’s reports along with lower than expected financial performance in the first quarter.
Canopy Growth stock price is currently trading around its 52-weeks low of $22 a share. Chief executive Mark Zekulin says investor’s reaction to the recent performance is fair, but he remains confident about Canopy’s prospects.
GMP Securities Analyst Ryan Macdonell has declined the target to C$45 from C$65. The analyst says lackluster performance highlights that Canopy has lost its leading market position in the recreational market. The return of C$6.4M oil and gel caps in the latest quarter indicates that the market is oversupplied, analyst claims.
Canopy Growth net revenue in the latest quarter increased 249% year over year. However, the revenues plunged 4% compared to the previous quarter. Its net revenue of $90 million missed analysts’ consensus estimate by $16 million.
The company is working on two priorities to offset negative sentiments.
First, the company is seeking to lay the foundation for creating a leadership position in the emerging industry. Consequently, the company plans to invest significantly in intellectual properties, building international reach, building brands and enhancing scaled production capability.
Second, the company is looking to generate sustainable revenue growth, high margins and big profits from Canadian markets.
Canopy’s dried cannabis sales in the first quarter increased 94% quarter over quarter in the Canadian recreational market.
The company has harvested 40,960 kilograms in Q1, representing an increase of 183% over Q4 2019. Moreover, its international medical cannabis revenue jumped 209% from the previous quarter.
The company has also filed 56 patent applications during the first quarter. This brings its patent portfolio to 111 patents and 270 patent applications.
The market analysts expect Canopy Growth stock price to remain under pressure. This is due to oversupply conditions both in recreational and medical markets. The increasing market competition could also add to headwinds.