Investors aren't fully appreciating the risks facing Canopy Growth (NYSE:CGC).

So says Stifel analyst Andrew Carter, who on Monday cut his rating on Canopy's stock from buy to sell and slashed his price target from 23 Canadian dollars ($17) to CA$18 ($13.30). His new target represents potential downside of more than 18%, based on Canopy's price of $16.26 just before noon EDT.

A grizzly bear.

Former bull Andrew Carter has turned bearish on Canopy Growth stock. Image source: Getty Images.

The downgrade followed Canopy's poorly received fourth-quarter earnings report. The cannabis company on Friday reported a net loss of CA$1.3 billion ($963 million), or CA$3.72 ($2.75) per share, which was far worse than analysts' consensus expectation. 

Canopy's shares plunged by more than 20% after its earnings release. Yet even in the wake of that sharp decline, Carter says he expects Canopy's shares to head even lower. "We believe the valuation has yet to fully reflect the challenges ahead," Carter said. 

Carter says management's decision to withdraw 2020's financial guidance and their description of 2021 as a "transition year" suggest that the road ahead will not be easy. Carter believes Canopy is facing significant coronavirus-related uncertainty in its operations. The former bull also cautions that -- while the company is making the necessary changes to improve its profitability, the transition may take longer than many investors expect. That, he says, will result in reduced interest in, and demand for, Canopy stock.

"We believe course correction will be difficult, expenses will remain elevated, and catalysts for driving enthusiasm will be slow to develop necessitating a further rerating for the shares," Carter said.