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Why Canopy Growth Stock Is Rebounding Today

By Keith Speights - Mar 10, 2020 at 11:54AM

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A better day for the overall stock market is helping the pot stock make a small comeback.

What happened

Shares of Canopy Growth (CGC -3.46%) were up 3.6% as of 11:31 a.m. EDT on Tuesday after rising as much as 10.8% earlier in the day. The small rebound for the Canadian cannabis producer was part of an overall stock market comeback after Monday's huge drop.

So what

Don't read too much into Canopy Growth's slight bounce today. For that matter, don't read too much into its big drop Monday, either.

Shadow of a Canadian maple leaf on top of a pile of cannabis leaves

Image source: Getty Images.

The current stock market volatility is due to two factors: worries about the COVID-19 coronavirus and plunging oil prices. Neither should affect the long-term prospects for marijuana stocks. It's possible that the coronavirus outbreak could cause consumers to stay home rather than go to retail cannabis stores. That could present a short-term concern for Canopy Growth and its peers, but shouldn't be a long-term issue.

Now what

While Canopy Growth stock is likely to remain highly volatile, the more important thing for investors to watch is how the company performs financially. New CEO David Klein has taken solid steps to reduce Canopy's spending, including shutting down two greenhouses. Canopy also should benefit from growing derivative sales in Canada's Cannabis 2.0 market and from an expanding number of retail marijuana stores in Ontario.

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$3.48 (-3.46%) $0.12

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