Canopy Growth (NASDAQ: CGC) stock price had a tough performance in 2023. It started the year well as it peaked at $32.18 in February before diving to the year-to-date low of $3.43. This crash was in line with other cannabis stocks like Tilray Brands, Scotts Miracle, Aurora Cannabis, and Innovative Industrial Properties. The AdvisorShares Pure Cannabis ETF (YOLO) crashed by 21%.
Legalisation woes continuedCanopy Growth and other cannabis stocks plunged hard in 2023 as concerns about legalisation in the US converged with weaker financial performance. While legislators talked about legalizing cannabis, nothing came out of it because of the divided government.
Many states have taken measures to legalize medical marijuana in the US. Data shows that over half of the states have legalized it.
Most recently, Germany called off a vote to legalize the commodity mostly because of concerns from Social Democrats. It is still unclear whether divisions about this process will continue.
The challenge for Canopy Growth and other cannabis companies is that the business is not growing as fast as expected. In its most recent results, the company said that its revenue dropped by 7% to $70 million in Q3. This drop was mostly because of Storz & Bickel whose revenue fell by 12%
The company’s business also slowed down in Canada. Its sales dropped in the quarter. Meanwhile, its adjusted EBITDA was negative $12 million, an improvement from the prior year.
Some analysts believe that Canopy Growth could still file for bankruptcy in the next few years. It ended the quarter with $270 million in cash and short-term investments. It had over $680 million in total debt. Management believes that its total debt could drop to about $570 million in the near term, down from over $1.24 billion a year ago.
Canopy Growth has made some improvements. It has sold some of its properties in a bid to raise cash. Also, most recently, it sold BioSteel, a drink brand that accounted for about 60% of its total EBITDA loss.
Canopy Growth stock price forecast
Turning to the daily chart, we see that the CGC stock price has been in a strong bearish trend for months. It found a strong support at $3.65, where it struggled to move several times between July and September. The stock remains below the 50-day and 100-day moving averages.
A closer look shows that the stock is attempting to form a double-bottom pattern while its volume has been higher than in the first half of the year. Therefore, the outlook for the stock for now is bearish, with the initial target to watch being at $3.65. A drop below that level will push it deeper into the penny stock category.
Still, there is a possibility that cannabis stocks like Canopy Growth will bounce back in 2024 as interest rates start moving downwards. This view is supported by the fact that the stock is forming a double-bottom pattern at $3.65 and whose neckline is at $19.25, which is about 272% above the current level.
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