Canada’s Worst Performing Stock in 2021

This is one of those ‘glass half empty or half full’ situations.

Andrew Willis 31 December, 2021 | 4:28AM
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Andrew Willis: We want to point out the worst performer in our coverage universe, especially when the stock has one of the biggest discounts to our fair value estimate – most importantly because long-term investors should generally be looking well beyond the span of one year...

Perhaps no stock better exemplifies long-term potential than Canopy Growth. At the top of a Canadian cannabis market expected to reach 20 billion dollars, we’re still around 3 billion and about nine years away from that target.

With the stock down around sixty percent since the start of the year, it seems investors may not have the patience while an industry – and company – continues to be built from the ground up. The selling could have been spurred by surprisingly weak near-term results, which do suggest a longer runway to profitability for the company.

Sector director Kristoffer Inton sees profitability by around 2024 at this point, with production and fixed cost leverage continuing to scale up to 2030 and beyond.  We believe market growth should eventually drive top-line growth, and if investors want a shorter-term catalyst, it’s worth considering what happens when the U.S. legalizes as early as 2023.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Canopy Growth Corp4.19 CAD13.24Rating

About Author

Andrew Willis

Andrew Willis  Senior Editor at Morningstar.ca. Follow him on Twitter @AndrewWillisCDN.

 

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