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Canopy Growth (TSX:WEED) Is Worth Watching Despite the Downturn

The pandemonium surrounding the legalization of recreational marijuana was supposed to lift marijuana stocks, particularly Canopy Growth (TSX:WEED)(NYSE:CGC). Since the company was recognized as the industry titan, bigger things are in store. Yet what ensued was totally unexpected.

Given all the positives that are skewed in Canopy’s favour, many are convinced the stock deserves stellar billing. The cannabis producer possesses an enormous cash stockpile supported by a fully developed infrastructure. The company’s multiple distribution channels can easily conquer domestic and international markets. But what happened?

What happened to Canopy Growth?

Investors would rather not talk about October. Wall Street was blindsided by events, such as the increase in bond yields and the continuing U.S.-China trade dispute. Global stock markets followed suit, and turmoil permeated the rest of the month. Canopy Growth and other industry players should have thrived but did not.

The shares of Canopy Growth started climbing on mid-August. It broke the $40 mark and continued its ascent to close 48.69% higher at $62.75 by the end of September. The fluctuations were not reflective of the market’s poor start in the fourth quarter. Canopy Growth soared to $73.75 on October 15, two days before legalization.

Unfortunately, that was the peak, and the unforeseen decline began. Instead of sizzling, the stock price dropped by 10.83% to $65.76. By the end of the week, Canopy Growth shares went further down to $61.30. The week that followed was even worse.

A steeper decline occurred that the price sunk below $50 before settling at $50.63 on October 26. With market volatility covering the stock market, the shares of Canopy Growth tanked to $43.48 on October 29 but managed to increase 11.38% to $48.43 to finish the month.

Canopy Growth is struggling. The start of November offered minimal hope with the stock closing at $48.92 on Friday, November 2. Investors who are still expecting to cash in on the industry leader want to know the prospects moving forward. Apprehensions are building up.

Canopy Growth after the market sell-off

The anticipated windfall after cannabis legalization did not materialize. Much to the dismay of investors in the marijuana space, Canopy Growth was not insulated from the market sell-off. The cannabis sector suffered a blow, including along with the other sectors in the TSX index. Profit taking was inevitable as well.

Some intervening factors also stalled what could have been a meteoric rise of Canopy Growth. Black market sellers are outselling the limited number of open brick-and-mortar stores. Legitimate sellers are hampered by distribution problems, which are causing delays in shipment and buying orders.

Customers are growing impatient with seeing many shops hanging “sold out” signs. More cannabis can be found in the black market, too. Sales are not likely to flourish, unless supplies stabilize with adequate volume to address the demand. Obviously, the setbacks today are transitory.

Canopy Growth is on a mission to boost production and expand to foreign markets. Investors are advised to monitor the stock closely and consider buying at the current depressed prices. The future of the company is still as bright as day.

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Fool contributor Christopher Liew has no position in any of the stocks mentioned.

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