ATB DowngradeATB market analyst- downgrades Canopy to underperform- WHY? As I said - DILUTION. Balance sheet cannot handle current debt. See below.
After lowering his Canadian legal sales forecast for the year ahead, Mr. Gomes downgraded Canopy Growth Corp. (
) to “underperform” from “sector perform” after also taking “a more cautious approach to growth in Germany.”
“Canopy Growth is making progress in cutting costs and improving margins to reach positive adj. EBITDA,” he said. “We like the asset-light strategy that reduces the need for capital investments, but we think the current size of the business is too small relative to the debt. While debt is being reduced, the balance sheet is still overleveraged; to deal with the balance sheet, we think Canopy Growth may have to rely on further equity dilution, which may continue to put the stock under pressure. Moreover, the U.S. cannabis market is facing headwinds, which reduces the potential value of Canopy USA. The combination of those factors supports our move to an Underperform rating.”