Valued at a market cap of $623 million, Canopy Growth (TSX:WEED) is among the largest cannabis companies in the world.
The marijuana stock has grossly underperformed the broader markets since Canada legalized cannabis for recreational use in October 2018. Today, WEED stock is down 99% from all-time highs as it has wrestled with multiple headwinds in recent years.
Canopy Growth and its peers have grappled with oversupply of cannabis products, high inventory levels, overvalued acquisitions, low profit margins, rising competition, and cannibalization from the illegal market.
Let’s see why Canopy Growth stock remains a high-risk investment in January 2026.
Is Canopy Growth stock a good buy right now?
Canopy Growth posted its strongest quarterly performance in recent years in the second quarter of fiscal 2026 (ended in September), but significant challenges remain, making the cannabis company a risky bet for investors.
The company reported a $3 million adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) loss, an improvement from the $6 million loss a year earlier, yet profitability remains elusive despite aggressive cost-cutting measures.
Revenue performance across Canopy’s business segments tells a mixed story.
- Canadian adult-use cannabis sales surged 30% year over year to drive second-quarter growth, fueled by demand for Claybourne infused pre-rolls and new All-In-One vape products from Tweed and 7ACRES.
- The Canadian medical cannabis division grew 17% as insured patient registrations climbed 20% annually.
- These bright spots were offset by a 39% decline in international cannabis sales.
CEO Luc Mongeau expressed disappointment with its performance in Europe, driven by supply constraints and internal process failures.
Flowers sourced from Portugal failed to meet quality standards, while logistical gaps prevented Canadian GMP (good manufacturing practice) facilities from delivering product to Germany.
A healthier balance sheet
Management has implemented daily oversight to stabilize operations, but expects European revenue to remain at depressed second-quarter levels through the remainder of fiscal 2026.
Canopy achieved $21 million in annualized cost savings, exceeding its $20 million target ahead of schedule. It also prepaid $50 million on its senior secured term loan, which should lower annual interest expenses by $6.5 million.
With close to $300 million in cash and no significant debt maturities until September 2027, the balance sheet is healthier compared to 2024.
Notably, management eliminated the going-concern warning that had previously cast doubt on the company’s survival.
Red flags
Yet several red flags persist.
- Cannabis gross margins declined year over year to 31% despite sequential improvement from the first quarter’s 24%.
- The company burned through $19 million in free cash flow during the quarter and is forecast to end fiscal 2026 with a free cash outflow of $50 million.
- Proposed Canadian government changes to medical cannabis reimbursement for veterans threaten a key revenue stream, though management continues to assess the potential impact.
Canopy’s Storz & Bickel vaporizer segment grew 5% sequentially with the VEAZY launch but faces headwinds from economic uncertainty and tariff pressures.
Until the company demonstrates sustained positive adjusted EBITDA and resolves its execution problems in Europe, the investment carries substantial risk.
What is the WEED stock price target?
Analysts tracking Canopy Growth stock forecast it will remain unprofitable in the near term. Despite a focus on cost-savings initiatives, Canopy Growth stock is expected to report a cumulative free cash outflow of over $100 million through fiscal 2028.
Despite these company-specific issues, Bay Street remains bullish on Canopy Growth stock and forecasts a 100% surge from current levels, based on consensus price targets.
