What happened
Shares of Canadian cannabis retailer Canopy Growth (CGC -6.62%) were down more than 20% as of 3:40 p.m. ET on Wednesday after an analyst gave the stock a $0 price target. The stock rose as much as 63% on Monday after the company announced several cost-saving measures and restructurings. The stock is down more than 79% so far this year.
So what
Eight Capital analyst Ty Collin gave Canopy a $0 price target after pointing out the company's poor cash position and the difficulty it will have in getting more funding, according to a story in MJBizDaily. "We therefore apply an asset-based/breakup valuation for Canopy, where we find a net asset value of zero after accounting for the Company's substantial debts," Collin said.
Now what
Canopy has certainly been struggling, so investors have a right to be wary, despite the expected growth in cannabis. The company cut 1,200 jobs last year and in its annual report, it said it was being investigated by the Securities and Exchange Commission after the company found what it called misstatements in the sales data for its BioSteel sports drink segment. In the fiscal 2023 yearly report, the company reported a loss of 3.3 billion Canadian dollars (roughly $2.49 billion), compared to a loss of CA$2.97 billion (roughly $2.24 billion) in 2022, while revenue dropped by 21% to CA$402.9 million (roughly $303.5 million). In the fourth quarter, revenue was CA$88 million (roughly $66.3 million), down 14% year over year, and the net loss was CA$648 million (roughly $488.2 million) in the quarter, a 10% greater loss than the same period last year.
