On Friday, Piper Sandler maintained its Underweight rating on Canopy Growth Corp (NASDAQ:CGC) with a steady price target of $3.00. The firm's analysis followed Canopy Growth's fourth quarter fiscal year 2024 earnings report, which showed revenue surpassing estimates while EBITDA fell short. Despite the mixed results, Canopy Growth's management has confirmed its goal to reach positive adjusted EBITDA in the second half of fiscal year 2025.
The company's financial trajectory indicates that the most challenging periods may be in the past, with a notable deceleration in cash burn. Piper Sandler projects modest adjusted EBITDA figures of C$0.8 million for the third quarter and C$1.4 million for the fourth quarter of fiscal year 2025. Nonetheless, the firm has adjusted its future sales forecasts downward, reducing the fiscal year 2025 estimate from approximately C$305 million to C$300 million, and the fiscal year 2026 projection from C$345 million to C$320 million.
Despite the federal rescheduling of cannabis from Schedule I to Schedule III, which is a significant regulatory shift, Piper Sandler does not foresee immediate impactful catalysts for Canopy Growth. The firm's valuation remains cautious, with the price target representing approximately two times the expected enterprise value to sales ratio for fiscal year 2025. The updated figures reflect a conservative outlook on the company's near-term growth prospects.
InvestingPro Insights
Following Piper Sandler's assessment, InvestingPro data provides additional context to Canopy Growth Corp's (NASDAQ:CGC) financial situation. With a market capitalization of $646.45 million, the company shows a negative P/E ratio of -0.63, indicating that investors are wary of the company's profitability challenges. The revenue for the last twelve months as of Q3 2024 stands at $273.4 million, but with a concerning decline of -1.24%. Moreover, the company's gross profit margin during the same period was 11.08%, reflecting the cost pressures it faces.
InvestingPro Tips reveal that analysts have revised their earnings upwards for the upcoming period, which could signal a potential shift in the company's financial trajectory. However, the company is quickly burning through cash and analysts anticipate a sales decline in the current year. Additionally, Canopy Growth has not paid dividends to shareholders and has not been profitable over the last twelve months. With high price volatility noted, the stock's movements may continue to be unpredictable, yet it has experienced a strong return over the last three months with a total price return of 161.09%.
For investors seeking a deeper analysis, InvestingPro offers more tips on Canopy Growth Corp, which can be accessed with a subscription. By using the coupon code PRONEWS24, users can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking valuable insights that could inform investment decisions. There are 11 additional InvestingPro Tips available for Canopy Growth Corp, which could provide further guidance on the stock's potential.
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