Friday was a wonderful day to own shares of Canadian cannabis company Canopy Growth (CGC 2.41%), which spiked nearly 69% on news that Germany will begin legalizing marijuana on April 1. There does, however, appear to have been some fluff in that price expansion, and some of the air is coming out of the bubble on Monday. As investors digest the news, Canopy Growth is giving back some gains today.
As of 11 a.m. ET, Canopy Growth stock is down 9.5%.
Canopy über Alles
Which is totally fine. Canopy stock outperformed pretty much every marijuana stock on the planet last week, and even after today's decline, it remains up more than 50% from where it was at close of trading Thursday, before the Germany news.
No wonder. As Canopy management explained to its investors, starting next week, "cannabis will officially be recognized as a non-narcotic in Germany [and] adult German consumers [can] consume cannabis legally and without fear of prosecution." This, says the company, gives it a unique opportunity to "expand its commercial presence" in Germany, both in medical and in recreational cannabis.
Is Canopy Growth stock a buy?
Admittedly, there are caveats. For one thing, Germany's law legalizes marijuana possession, home growing, and distribution by "social clubs." It does not yet permit commercial cultivation of marijuana in Germany, however, nor retail sale. Those laws are coming, but they're not here yet. And this will limit or at least delay the immediate benefits for Canopy Growth's business.
In the meantime, Canopy Growth's business remains deeply unprofitable. Over the past year, Canopy stock lost nearly $14 per share (and it's worth only $7 per share!). Analysts polled by S&P Global Market Intelligence, furthermore, warn that even with Germany in the picture, Canopy Growth stock is likely to continue losing money through at least 2027.
With less than $140 million in cash, $510 million in debt, and a cash-burn rate well in excess of $300 million a year, Canopy Growth stock isn't out of the weeds (er, woods) just yet.
