Cannabis stocks have had a wild ride over the past few years. First came the hype, then the crash, and more recently, a period of stagnation as companies struggled with oversupply, regulatory hurdles, and slow profitability. It’s no wonder most investors have written the sector off entirely. But sometimes, when a stock is down and out, that’s exactly when it starts to get interesting. For me, Canopy Growth (TSX:WEED) is one cannabis stock that still earns a place in a speculative corner of my portfolio.
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Don’t dive in
Let’s be clear: Canopy is not a stock for the faint of heart. It has lost nearly all of its value from the peak in 2018 and continues to face mounting losses. But lately, there are some green shoots, pun intended, that suggest a turnaround may finally be taking root. The cannabis stock’s fourth quarter fiscal 2025 results showed progress on its cost-cutting efforts and a renewed focus on its core markets.
Revenue came in at $65 million, slightly down 11% from the year before, but what stood out was the narrowing of losses. The company identified and will deliver at least $20 million in annualized savings over the next year and a half, if not sooner. There’s still a big red number, but it’s a massive improvement. The cannabis stock has been restructuring aggressively, exiting unprofitable markets, shutting down inefficient operations, and leaning into its BioSteel sale to free up cash.
Even more interesting is Canopy’s U.S. strategy. Through its holding company, Canopy USA, it plans to consolidate its American cannabis assets, including Acreage Holdings and Jetty Extracts. This could eventually give it an early lead if and when U.S. federal legalization moves forward. That’s still a big “if,” of course, but the upside is enormous if the political winds shift.
Considerations
Still, it’s not all sunshine. Canopy remains in a fragile position, and dilution is always a risk as it continues raising funds. The cannabis market is still very competitive, and Canopy has lost market share in the past. But the cannabis stock now has a clearer plan than it has had in years. It’s focusing on premium products, like its Tweed and 7ACRES brands, and is working to simplify its business model. If management can keep improving margins and trimming the fat, it may finally have a fighting chance.
Right now, shares trade for around $1.64, a far cry from the $60-plus levels we saw back in the mania days. At this level, the cannabis stock is being priced as if it’s going out of business. That creates a very asymmetric risk-reward setup. If Canopy manages to survive and tap into U.S. growth, there’s room for a substantial rebound. If it doesn’t, the downside from here is much smaller than it was five years ago.
Another reason I’ve added Canopy to my speculative watchlist is sentiment. Most investors have long since moved on, and many institutions avoid cannabis entirely due to federal regulations. That leaves a vacuum. If there’s even a whiff of regulatory change or a positive earnings surprise, it could spark a major short-term rally.
Bottom line
Of course, this is not the kind of cannabis stock to bet the farm on. It’s more like a lottery ticket with a slightly better chance of paying off. But in every portfolio, I think there’s room for a high-risk, high-reward play, so long as you know the risks going in.
Cannabis still has long-term potential. Legalization trends are progressing globally, and Canada continues to be a testing ground for what’s to come. Canopy isn’t the dominant player it once was, but it’s showing signs of life. With improving financials, strategic realignment, and optionality in the U.S., it’s one cannabis stock that has just enough spark left to make it worth the risk.
