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Cannabis Operator CGC Rises 15% in a Month: Time to Buy, Hold or Sell?
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Key Takeaways
Canopy Growth's cannabis revenues rose 14%, with growth across Canadian and international operations.
Adjusted gross margin rose to 31%, while the adjusted EBITDA loss narrowed 59% to C$3.2 million.
Canopy Growth expects positive adjusted EBITDA in fiscal 2027 as MTL integration and cost gains continue.
Shares of Canopy Growth Corporation (CGC - Free Report) have staged a strong rally over the past month, thanks to the latest earnings results that point to improving operating performance.
Earlier this month, the company reported first-quarter results for fiscal 2027 (year ending March 2027), which beat our estimates for both earnings and sales. The results highlighted growth across all business avenues and improving margins.
However, investors typically focus beyond a single quarter’s numbers and assess broader fundamentals. Let’s take a closer look at the company’s fundamentals to determine whether the stock deserves a place in investors’ portfolios.
CGC’s Cannabis Business Shows Signs of a Turnaround
CGC’s cannabis business appears to be on a firmer footing as the company works to improve growth, cultivation and supply across its markets. The strategy centers on strengthening its Canadian medical and adult-use businesses, improving cultivation efficiency and expanding its international medical cannabis operations.
The company has been working to make its cannabis operations more efficient following the acquisition of MTL Cannabis in March 2026. MTL added cultivation expertise, patient networks and production capacity, while Canopy is pursuing cost synergies and streamlining its distribution footprint and labor. Management has cited early improvements in yields, THC levels and cost per gram. Other than this, it expects higher production and more consistent flower supply to support revenue growth and margins.
These initiatives are beginning to show up in the results. In the first quarter, overall cannabis revenues increased 14% year over year, with Canadian medical, adult-use and international operations all delivering growth. Medical revenues rose 22% while adult-use revenues increased 10%. International cannabis revenues grew 10%, which is particularly notable given the supply-chain challenges Canopy had faced in Europe. Poland was a key contributor, while management expects U.K. flower shipments to begin contributing to revenues in the second half of fiscal 2027, providing another potential source of growth.
The improving business is also helping Canopy move closer to profitability. Adjusted gross margin rose 600 basis points to 31% in the first quarter, while the adjusted EBITDA loss narrowed 59% year over year to C$3.2 million. Management reiterated that the company remains on track to deliver positive adjusted EBITDA during fiscal 2027 as further MTL integration efficiencies, production gains and cost improvements are realized.
However, cash flow remains an area to watch. Canopy used C$25 million in operating activities during the quarter, although management said this was above the run rate expected for the rest of fiscal 2027 as working capital is expected to normalize, and one-time transaction and restructuring costs decline. The company ended June with C$337 million of cash, which management believes provides financial capacity to support its growth initiatives.
CGC’s Storz & Bickel Rebounds, Margin Gains May Be Temporary
Storz & Bickel is Canopy Growth’s vaporization business and is focused on developing and selling vaporizers for medical cannabis and adult-use consumers. The brand has an established international presence, with Canopy currently focusing on expanding its reach in North America and into new markets.
After a difficult fiscal 2026, the business is showing signs of recovery. Q1 results showed revenues up 6% year over year, backed by growth in markets outside its traditional U.S. and German strongholds. However, the sharp improvement in profitability should be viewed with some caution. Gross margin surged to 48% from 29% a year ago, helped by cost-rationalization efforts and, importantly, a refund of U.S. tariffs recognized during the quarter. Management expects continued improvement, but the tariff refund was a favorable one-time benefit and should not be viewed as a recurring source of margin expansion.
Canopy Growth Faces Stiff Competition
Canopy Growth operates in a highly competitive cannabis market, against established players like Aurora Cannabis (ACB - Free Report) and Tilray Brands (TLRY - Free Report) . Similar to CGC, these companies maintain a sizable presence in the Canadian cannabis market while also expanding international operations.
Aurora has increasingly prioritized higher-margin international medical cannabis markets, particularly Europe. Its international medical cannabis platform has also drawn strategic interest from Curaleaf Holdings (CURLF - Free Report) , which recently launched an unsolicited takeover bid for Aurora, citing the combination of Aurora’s international medical cannabis platform and EU-GMP cultivation and manufacturing capabilities as a key strategic rationale.
Tilray Brands is also pursuing international medical cannabis growth. It recently acquired HelloMD to expand patient access in Canada while continuing to grow its medical cannabis operations across Europe through Tilray Medical and CC Pharma.
CGC Stock Performance & Estimates
Year to date, shares of Canopy Growth have lost 8% compared with the industry’s 15% decline.
Image Source: Zacks Investment Research
Loss estimates for fiscal 2026 and 2027 have improved in the past 30 days.
Image Source: Zacks Investment Research
How to Play CGC Stock?
While Canopy Growth’s improving operating trends are encouraging, it is still too early to determine whether the turnaround can be sustained. Analyst sentiment has also improved modestly, with loss estimates for fiscal 2026 and 2027 improving over the past 30 days, but the revisions have not been significant enough to signal a clear shift in expectations.
Given the recent operational improvement, investors may prefer to adopt a wait-and-watch approach for the next couple of quarters to assess whether CGC can maintain its growth and profitability trajectory. Existing positions can be maintained, while new investors may want to wait for more evidence of sustained improvement. The stock currently carries a Zacks Rank #3 (Hold).
View the Zacks #1 Rank List
Image: Bigstock
Cannabis Operator CGC Rises 15% in a Month: Time to Buy, Hold or Sell?
Key Takeaways
Shares of Canopy Growth Corporation (CGC - Free Report) have staged a strong rally over the past month, thanks to the latest earnings results that point to improving operating performance.
Earlier this month, the company reported first-quarter results for fiscal 2027 (year ending March 2027), which beat our estimates for both earnings and sales. The results highlighted growth across all business avenues and improving margins.
However, investors typically focus beyond a single quarter’s numbers and assess broader fundamentals. Let’s take a closer look at the company’s fundamentals to determine whether the stock deserves a place in investors’ portfolios.
CGC’s Cannabis Business Shows Signs of a Turnaround
CGC’s cannabis business appears to be on a firmer footing as the company works to improve growth, cultivation and supply across its markets. The strategy centers on strengthening its Canadian medical and adult-use businesses, improving cultivation efficiency and expanding its international medical cannabis operations.
The company has been working to make its cannabis operations more efficient following the acquisition of MTL Cannabis in March 2026. MTL added cultivation expertise, patient networks and production capacity, while Canopy is pursuing cost synergies and streamlining its distribution footprint and labor. Management has cited early improvements in yields, THC levels and cost per gram. Other than this, it expects higher production and more consistent flower supply to support revenue growth and margins.
These initiatives are beginning to show up in the results. In the first quarter, overall cannabis revenues increased 14% year over year, with Canadian medical, adult-use and international operations all delivering growth. Medical revenues rose 22% while adult-use revenues increased 10%. International cannabis revenues grew 10%, which is particularly notable given the supply-chain challenges Canopy had faced in Europe. Poland was a key contributor, while management expects U.K. flower shipments to begin contributing to revenues in the second half of fiscal 2027, providing another potential source of growth.
The improving business is also helping Canopy move closer to profitability. Adjusted gross margin rose 600 basis points to 31% in the first quarter, while the adjusted EBITDA loss narrowed 59% year over year to C$3.2 million. Management reiterated that the company remains on track to deliver positive adjusted EBITDA during fiscal 2027 as further MTL integration efficiencies, production gains and cost improvements are realized.
However, cash flow remains an area to watch. Canopy used C$25 million in operating activities during the quarter, although management said this was above the run rate expected for the rest of fiscal 2027 as working capital is expected to normalize, and one-time transaction and restructuring costs decline. The company ended June with C$337 million of cash, which management believes provides financial capacity to support its growth initiatives.
CGC’s Storz & Bickel Rebounds, Margin Gains May Be Temporary
Storz & Bickel is Canopy Growth’s vaporization business and is focused on developing and selling vaporizers for medical cannabis and adult-use consumers. The brand has an established international presence, with Canopy currently focusing on expanding its reach in North America and into new markets.
After a difficult fiscal 2026, the business is showing signs of recovery. Q1 results showed revenues up 6% year over year, backed by growth in markets outside its traditional U.S. and German strongholds. However, the sharp improvement in profitability should be viewed with some caution. Gross margin surged to 48% from 29% a year ago, helped by cost-rationalization efforts and, importantly, a refund of U.S. tariffs recognized during the quarter. Management expects continued improvement, but the tariff refund was a favorable one-time benefit and should not be viewed as a recurring source of margin expansion.
Canopy Growth Faces Stiff Competition
Canopy Growth operates in a highly competitive cannabis market, against established players like Aurora Cannabis (ACB - Free Report) and Tilray Brands (TLRY - Free Report) . Similar to CGC, these companies maintain a sizable presence in the Canadian cannabis market while also expanding international operations.
Aurora has increasingly prioritized higher-margin international medical cannabis markets, particularly Europe. Its international medical cannabis platform has also drawn strategic interest from Curaleaf Holdings (CURLF - Free Report) , which recently launched an unsolicited takeover bid for Aurora, citing the combination of Aurora’s international medical cannabis platform and EU-GMP cultivation and manufacturing capabilities as a key strategic rationale.
Tilray Brands is also pursuing international medical cannabis growth. It recently acquired HelloMD to expand patient access in Canada while continuing to grow its medical cannabis operations across Europe through Tilray Medical and CC Pharma.
CGC Stock Performance & Estimates
Year to date, shares of Canopy Growth have lost 8% compared with the industry’s 15% decline.
Image Source: Zacks Investment Research
Loss estimates for fiscal 2026 and 2027 have improved in the past 30 days.
Image Source: Zacks Investment Research
How to Play CGC Stock?
While Canopy Growth’s improving operating trends are encouraging, it is still too early to determine whether the turnaround can be sustained. Analyst sentiment has also improved modestly, with loss estimates for fiscal 2026 and 2027 improving over the past 30 days, but the revisions have not been significant enough to signal a clear shift in expectations.
Given the recent operational improvement, investors may prefer to adopt a wait-and-watch approach for the next couple of quarters to assess whether CGC can maintain its growth and profitability trajectory. Existing positions can be maintained, while new investors may want to wait for more evidence of sustained improvement. The stock currently carries a Zacks Rank #3 (Hold).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.