David George-Cosh

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Analysts took a hard look at Canopy Growth Corp.'s fourth-quarter results, broadly downgrading or reducing their target price on the pot giant's stock following another steep quarterly loss and missed revenue expectations.​

Shares of Canopy fell in early trading Monday following a stream of reports from several analysts including those at Bank of Montreal, CIBC, Royal Bank of Canada, and Desjardins Securities that suggest the company needs to do more work to regain lost market share in the Canadian cannabis market. 

"The concern we now have is that management’s outlook for both industry and Canopy Growth may be too optimistic in this current environment," said BMO Capital Markets analyst Tamy Chen in a report Monday. BMO lowered its rating on Canopy to "market perform" and revised its 12-month price target to $24 from $40. 

Chen estimates that Canopy's market share fell to 16 per cent from 20.5 per cent in the prior quarter, and forecasts the company's current cost structure will still be above revenues for the next fiscal year. 

Canopy announced Friday its fourth-quarter revenue was $107.9 million, down 13 per cent from the prior quarter, as its Canadian recreational cannabis sales plunged 28 per cent. It also reported a net loss of $1.3 billion, including about $843 million in restructuring and impairment charges. 

Stifel analyst Andrew Carter said in a report that Canopy's executives "have yet to fully grasp the organization’s challenges" after the company abandoned its financial targets that forecasted it would be profitable within the next three-to-five years. 

"Canopy Growth sports the resources to deliver on its ambitions of leading growth in the global cannabis category, but the resources have yet to produce tangible evidence of an enduring right to win in the developing category," Carter said.

The Stifel analyst lowered his estimate for Canopy's revenue this year to about $467 million from $568 million, and now has a "sell" rating on the company's stock and an $18 price target. CIBC analyst John Zamparo also downgraded his rating on Canopy's stock to "neutral" with a $26 price target, down from $35. He noted that it will likely take several quarters for Canopy to fix its supply issues and regain its market share in Canada. 

"This quarter likely reflects the trough, but we believe investors may be best served waiting until a line of sight emerges on progress in share capture in larger categories like dry flower," Zamparo said. 

Meanwhile, Desjardins analyst John Chu called Canopy's plan to focus on its core markets of Canada, the U.S. and Germany with an asset-light strategy "well thought out and focused" but noted soft revenue is expected as the company transitions to its new playbook. Chu maintained his "hold" rating on Canopy shares but lowered his price target to $29 from $34.