Canopy Growth (CGC 2.68%) emerged as a leader in the cannabis industry when Canada legalized recreational, adult use of the substance in 2018. Investors had high hopes for the company and the rest of the market but, unfortunately, these hopes have now evaporated.
Over the past five years, Canopy Growth has lost 99% of its value, and the company's shares now trade for under $2 apiece. Yet the stock remains unattractive. Here's why.
Terrible financial results
Canopy Growth has a deep footprint in the Canadian cannabis market, encompassing both recreational and medical sectors, but the company's business extends far beyond this neighbor to the north. The pot grower has significant international operations, notably through Storz & Bickel, a subsidiary that manufactures and markets vape devices in various countries. Canopy Growth's suite of products spans dried flower, vapes, pre-rolls, oils, cannabis-infused drinks, and more.
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Despite having a significant worldwide footprint and a vast portfolio, the company has faced substantial headwinds. The cannabis market remains severely regulated, even in Canada, where laws are more lax. Never mind in other countries like the U.S., where the substance remains illegal at the federal level. Further, the perception that the pot market would become far more lucrative following Canada's decision to legalize weed created a bit of a gold rush, leading to stiff competition and oversupply problems in the market.
Although Canopy Growth remained one of the more notable players throughout all this, that's not saying much, considering how poorly the industry has performed over the past five years. Meanwhile, the company's financial results remain horrendous.
On May 30, Canopy Growth reported its financial results for the fourth quarter of its fiscal year 2025, ending on March 31. Though the company's cannabis revenue in Canada increased by 4% year over year, Canopy Growth's net revenue was 65 million Canadian dollars, down 11%, compared to the year-ago period. The pot grower's performance in international markets negatively impacted its overall performance.
Elsewhere, Canopy Growth remains deeply unprofitable. Its net loss per share for the period was CA$1.43, much worse than the CA$1.03 loss per share it reported in the year-ago period.
There's little hope left
Canopy Growth tried to put a positive spin on its financial results. It pointed to its decreasing total debt by 49% during its fiscal year 2025.
The pot grower continues to try to cut costs and improve profitability. Management also expects to reach positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in "the near term" and to become free-cash-flow positive "over time."
NASDAQ: CGC
Key Data Points
Bulls could point to potential long-term opportunities, as Canopy Growth has a presence in the U.S. cannabis market. If the substance does become legal at the federal level in the country, it could hit the ground running and become a leader in what would be the largest marijuana market in the world. However, investors shouldn't fall for it.
Canopy Growth's goal to reach positive adjusted EBITDA in the "near term" is just hopeful enough and vague enough to be materially meaningless for the purposes of rendering its prospects more attractive. Even if it does achieve that goal, that still wouldn't make it profitable on an adjusted basis, let alone on a generally accepted accounting principles (GAAP) basis.
Maybe that wouldn't be a massive issue if Canopy Growth was growing its revenue at a good clip. Plenty of companies that are reporting losses on the bottom line can be attractive investments, but there's little else going in Canopy Growth's favor to justify buying the stock right now.
No one can predict when or whether pot will become legal at the federal level in the U.S. Even if it does, that might not solve the company's issues, the same way regulatory progress in Canada didn't lead to automatic success.
In short, even if its stock is trading below $2 per share, Canopy Growth doesn't look like an attractive stock to buy. Investors should steer clear of the company.
