Linton voluntold to leave Canopy, no change to our view

We see no change to company’s strategy; shares look undervalued

Kristoffer Inton 3 July, 2019 | 12:58PM

Linton Leaves Canopy, Cannabis

On the morning of July 3, Canopy Growth (WEED) announced the departure of co-CEO Bruce Linton. Co-CEO Mark Zekulin is now sole CEO, although this may be temporary as the board of directors has launched a search for a new CEO. The company’s press release phrased the departure as mutual, although Linton has stated that he was fired. Despite the disagreement on how the decision was made, the reason appears to be disappointment in the company’s recently reported fourth-quarter results, particularly by major investor Constellation Brands. Given that the company and industry are still in the growth stage, we are surprised to see the short-term focus on near-term results.

That being said, as outsiders, we aren’t fully in tune with everything that may have led to Linton’s departure. Nevertheless, we do not expect to see a major shift in strategy. Zekulin has been with the company since its early days and is very familiar with the company. In addition, the deal to acquire Acreage Holdings upon U.S. federal legalization remains in place, and Constellation Brands remains as a strategic investor and partner.

Our $71 per share fair value estimates and no-moat rating are unchanged. We think shares are undervalued at the current price and see Canopy as an attractive way to play U.S. legalization trends and the development of cannabis-infused consumer products.

 

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Canopy Growth Corp46.32 CAD-0.62

About Author

Kristoffer Inton

Kristoffer Inton  Kristoffer Inton is an equity analyst for Morningstar, covering gold, coal and cement companies. Before joining Morningstar in 2013, he was an investment banking associate for Guggenheim Securities in New York. He holds a bachelor’s degree in finance with high honours from the University of Illinois.