Canopy Growth: Is There Budding Potential in the Cannabis Market?

Canopy Growth stock hit 52-week lows recently on news of needing to re-file on its BIoSteel business, so what now?

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Powder of Cannabis (Drugs), Analysis of Cannabis in laboratory.

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Canopy Growth (TSX:WEED) may be one of the most undervalued stocks on the TSX today. Even in the cannabis sector, Canopy Growth stock simply continues to be beaten down by past performance. Or, to be frank, the instability of other cannabis stocks rather than its own performance of late.

Yet just because a stock should be valued higher doesn’t mean investors and financial institutions will see it that way. So let’s look at whether Canopy Growth stock is a great opportunity right now, or if investors should hold off.

Wa present profits

There were a lot of “one days” when it came to investing in Canopy Growth stock over the last few years. One day it would be the biggest producer in the world. One day it would provide cannabis to the country set to be the largest consumer, as in the United States. And, therefore, one day it could make you really rich!

However, what investors really want are right nows. In that sense, Canopy Growth stock shifted over the last few years. It made cuts from staff, closed locations, and severely cut back on research and development. Instead, it focused on profitable areas of revenue creation.

The company, in particular, looks to its BioSteel business to help fill this gap. However, the company came out with a statement on May 12 stating it would refile three of its past quarterly financial statements. Canopy Growth stock uncovered “material misstatements” linked to its BioSteel business.

This caused the company’s share price to drop to 52-week lows, but it’s unclear what those errors were. Therefore, investors do not have any idea as to what these numbers could be, or what could happen in the near future as the review continues.

What about Acreage?

There is a lot of dependency on BioSteel, and a lot of attention to it right now. However, what about the Acreage Holdings acquisition Canopy Growth stock went through last year? The company announced it would be going through with the purchase after the White House stated it would give a pardon to felony charges of simple marijuana possession.

The Acreage Holdings finalization isn’t likely to go through until the second half of 2023. And given the recent information, that might be pushed back even longer. And that might come as a relief to many investors who believe frankly that Canopy Growth stock cannot afford the US$3.4 billion purchase.

But, what if it can?

Future looking investors

If you’re hoping to buy now and hold for a significantly long period of time, Canopy Growth stock looks like a steal. Economists note that the marijuana industry continues to expand rapidly not just in Canada and the United States, but around the world. And not just recreationally, but medicinally as well.

Furthermore, the stock is so cheap. There is bound to be growth, with analysts pegging the consensus price target at about $3 as of writing. That could make shares double in price in just a year!

While Canopy Growth stock is down and could fall further from these re-filings, don’t count it out. If you’re interested in major growth in the next decade, then I would certainly consider picking up the stock. However, if you’re hoping for the riches we saw back in 2017, think again. It’s unlikely to happen for the next several years or more.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has positions in Canopy Growth. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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