A lot has changed since Canada legalized marijuana for recreational use in October 2018. Seven years back, several cannabis stocks, including Canopy Growth (TSX:WEED), were trading near all-time highs. Investors were optimistic about a rapidly expanding addressable market that would help marijuana producers expand production and benefit from economies of scale.
However, soon after legalization, Canopy Growth and its peers were wrestling with a wide range of issues that included cannibalization from illegal sales, rising competition, high inventory levels, overvalued acquisitions, and mounting losses.
Today, Canopy Growth stock is valued at a market cap of $293 million and is down 99.8% from all-time highs.
Is Canopy Growth stock a good buy right now?
Canopy Growth’s fiscal 2025 results reveal a company in transition under new CEO Luc Mongeau, who has implemented aggressive restructuring measures to address operational challenges. In fiscal 2025 (ended in March), the marijuana producer posted an adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) loss of $23 million and missed its profitability targets. However, the management has identified clear pathways to improvement through cost reduction and operational focus.
Canopy’s strategic realignment centers on three key areas: unifying global medical cannabis operations, streamlining Canadian adult-use business toward high-margin segments, and centralizing operations.
Mongeau has already identified $20 million in annual cost savings, with over 50% executed, while eliminating multiple management layers to accelerate decision-making.
Canopy emphasized that medical marijuana sales grew by 13% year over year, allowing the company to gain market share in a declining segment. Moreover, the successful launch of Claybourne infused pre-rolls, which achieved third-place rankings in some regions, validates a focused portfolio strategy. Fill rates have improved dramatically from the mid-80s to the mid-90s range, indicating better supply chain coordination.
However, significant challenges persist for Canopy Growth. For instance, Storz & Bickel’s revenue declined 23% in Q4, due to broad vaporizer market softness that continued into fiscal 2026.
International operations also struggled with supply consistency issues in Europe and increased competition in Australia. Most concerning is Canopy USA’s deteriorating position, particularly Acreage’s liquidity challenges and the Ohio market’s underperformance, which reduced the combined entity’s value significantly.
What’s next for WEED stock?
Canopy’s path to positive adjusted EBITDA relies heavily on the execution of the $20 million cost reduction program and revenue growth in the medical cannabis segment.
Canopy Growth stock presents a classic turnaround scenario with both upside potential and execution risk. The Canadian cannabis giant maintains strong brand recognition in medical marijuana and benefits from an experienced management team implementing focused operational improvements.
Alternatively, the investment case remains speculative given persistent losses, competitive pressures, and regulatory uncertainties. The Canopy USA situation adds complexity and may require additional capital allocation to stabilize operations.
While the $20 million cost reduction program provides breathing room, achieving sustainable profitability requires successful execution across multiple business lines simultaneously.
Canopy Growth ended fiscal 2025 with a cash balance of $131 million. Over the next three years, its free cash outflow could total $180 million, which indicates the company will have to raise additional capital and dilute existing shareholder wealth.
For risk-tolerant investors believing in long-term cannabis market growth, Canopy Growth’s current valuation may offer an opportunity if management successfully executes its streamlined strategy. Conservative investors should await evidence of operational improvements and progress toward profitability before considering investment.
