The initial surge in Canopy Growth’s stock price, fueled by a major U.S. regulatory announcement, has lost momentum. Investor sentiment has shifted from euphoria to profit-taking, pulling the share price down toward a key technical level and erasing a portion of its recent gains.
This marks a sharp correction. After declining approximately 10.8% to close at $1.32 on Monday, the weakness has persisted. Current trading data indicates the stock is testing a support level around $1.30. This pullback stands in stark contrast to the performance seen just days prior. On December 16, news that President Trump intends to reclassify cannabis to the less restrictive Schedule III category triggered a single-day rally of over 38%.
A Sober Assessment Follows the Rally
The market is undergoing a reality check. While the proposed Schedule III reclassification promises long-term benefits like tax relief and improved access to banking services, it does not instantly resolve the company’s fundamental balance sheet challenges. Investors are recognizing that these operational advantages will materialize in financial statements only after a significant delay. Despite the recent spike, the company’s total market valuation for 2025 has been cut in half. The current price action suggests the speculative “Trump rally” is, for now, running out of steam.
Should investors sell immediately? Or is it worth buying Canopy Growth?
Underlying Operational Improvements
Beyond the share price volatility, Canopy Growth’s management continues to execute its corporate restructuring. The recently announced acquisition of MTL Cannabis for 125 million Canadian dollars (CAD) is aimed at bolstering its position in Canada’s medical cannabis market and enhancing operational efficiency. This strategic move complements the latest quarterly results for the second quarter of fiscal 2026, which highlighted several positive operational trends:
- A 30 percent increase in adult-use cannabis revenue in Canada.
- Cash and short-term investments totaling approximately $298 million.
- A reduction in adjusted EBITDA loss to 3 million CAD, signaling progress toward profitability.
However, this strategic acquisition has not been sufficient, in the immediate term, to provide support for the falling share price. Investor focus remains almost exclusively fixed on the broader macroeconomic and regulatory landscape.
The prevailing mood is fragile. Market participants are carefully weighing the long-term potential of U.S. market liberalization against the arduous, ongoing corporate turnaround. Should the stock fail to establish a technical base of support in the $1.30 region, a further decline toward annual lows is a distinct possibility once the speculative fervor from last week has completely dissipated.
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