Canopy Growth Corporation: Five Reasons Why You Should Avoid It

Canopy Growth Corporation has been on a roll in 2016.  Starting at $2.97 in January 2016, it’s now trading at $9.89 as of Friday’s close and valued at over $1 billion (CDN).  That’s mucho growth for a company that doesn’t make mucho dinero.  Is it still a good buy?  No, here’s why:

Industry Risk:  Valeant Pharmaceuticals, Concordia International and Cipher Pharmaceuticals.  The TSX is littered with Canadian pharmaceutical companies who flew high into the sky and now sit with the worms.  Is Canopy a pharma?  If it’s quacks like a duck…
Valuation Risk: Does Canopy make money?  With $15 million in revenue reported in 2016 as of September 30, 2016 and about $1.4 million in earnings, they are making some coin.  Will they earnings continue to grow enough to justify a they current valuation.  Probably not, so look for a price correction to something more reasonable.
Regulatory Risk: Medical marijuana does not a $1 billion company make.  Recreational marijuana on the other hand might under the right market conditions.  Canopy is banking on getting in on the recreational market game, but it’s not legal yet in Canada and there are risks associated with any controlled substance.
Branding Risk:  Snoop Dog?  Canopy has created a brand around Snoop Dog.  Does it matter. Sure if you like Snoop Dog. Been there, seen that before.  Remember Alicia Keys and BlackBerry?  Exactly.
Competition Risk: Growing marijuana is not proprietary and the space is getting crowded.   Canopy is not the only game in town. Bubble anyone?
  • malcolmkyle

    Load of bunk and ignorance, anyone?