Over the past five years, Canopy Growth (CGC +0.05%) has been a profoundly disappointing stock. Shares have lost more than 99% of their value and currently trade at around $1 each. Some might think that at these levels, Canopy Growth is finally attractive. Nothing could be further from the truth. Here is why I wouldn't get anywhere close to this cannabis company, and you probably shouldn't either.
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Terrible financial results
At the beginning of the decade, many investors were bullish on the cannabis industry. The sentiment was understandable at the time. There had been notable regulatory progress that would benefit cannabis companies like Canopy Growth, or so the argument went. Canopy even positioned itself as a leader in the Canadian market and attracted a partnership with a large, well-established corporation with experience navigating highly regulated consumer goods niches, namely, beverage giant Constellation Brands. However, none of that allowed Canopy Growth to perform well.
The company's revenue has been unimpressive and inconsistent. What has been consistent is the red ink on the bottom line. Now, Canopy Growth has made some progress. In the second quarter of its fiscal year 2026, ending on Sept. 30, its net revenue increased by 6% year over year to 66.7 million Canadian dollars ($49.3 million). The company's net loss per share was CA$0.01 ($0.0074), far better than the CA$1.48 ($1.09) loss reported in the year-ago period. It also owns some famous brands in its industry, including Storz & Bickel's vape line. Despite all that, there is yet another reason to stay far away from the stock.
NASDAQ: CGC
Key Data Points
A challenging landscape
Canopy Growth's poor performance in recent years wasn't simply due to a poor strategy. Practically every pure-play cannabis company has underperformed broader equities over the past five years, regardless of the strategy they chose. That points to structural problems within the industry that will be extremely difficult for Canopy Growth or any of its peers to shake off. There is significant regulatory oversight, stiff competition, illegal channels that steal sales from legally operating businesses, and other challenges.
The U.S. recently reclassified cannabis from a Schedule I into a Schedule III substance. This change will have several ramifications. It will be easier for companies in the country to access banking services, they will be able to deduct normal business expenses, and research into the substance could open up more business opportunities. However, that won't solve Canopy Growth's problems, a company that was unable to find much success in Canada, which has had full-blown legalization since 2018.
Even if Canopy Growth does benefit from recent regulatory changes in the U.S. -- as it did in the early days of legalization in Canada -- the remaining challenges will eventually be too deep for the company to overcome. That's why the stock isn't worth buying.
