Market sentiment toward Canopy Growth remains guarded, with operational improvements overshadowed by persistent profitability challenges. The Canadian cannabis company recently posted third-quarter revenue that surpassed expectations, but a deeper look at the earnings reveals significant pressure on its bottom line. In a direct response to these ongoing margin issues, Alliance Global Partners has revised its price target for the company downward.
Financial Performance: A Quarter of Contrasts
The quarterly results for Q3 of fiscal year 2026, released on February 6, present a dual narrative. Revenue came in at CAD 90.39 million, exceeding analyst forecasts. However, this top-line strength was not matched at the profit level, where the loss per share was notably wider than anticipated.
Key Financial Metrics from the Report:
- Earnings Per Share (EPS): A loss of CAD -0.18, significantly missing the consensus estimate of a CAD -0.04 loss.
- Cannabis Gross Margin: Declined to 25%, down from 28% in the prior-year period.
- Net Loss: Reduced by approximately 49% year-over-year.
- Liquidity Position: The company holds CAD 371 million in cash and cash equivalents.
The core Canadian business showed resilience, with medical cannabis revenue growing by 15% and adult-use sales advancing by 8%. Offsetting this progress, the margin for the Storz & Bickel subsidiary contracted from 40% to 37%, attributed to softer sales and increased U.S. import duties.
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Analyst Downgrade Reflects Sector-Wide Skepticism
Citing these margin pressures, Alliance Global analyst Aaron Grey adjusted the firm’s outlook. The price target was lowered from CAD 2.50 to CAD 1.80, though the “Neutral” rating was maintained. The decision underscores growing apprehension about the company’s gross profitability in the recent quarter.
Further clouding the outlook is uncertainty surrounding potential changes to veteran reimbursement policies. This revised valuation mirrors the caution prevailing among institutional investors, who continue to question the path to sustainable profitability within the cannabis industry despite ongoing corporate restructuring efforts.
Strategic Crossroads: Recapitalization and a Pending Vote
Management is actively implementing strategic countermeasures. In January, a recapitalization plan was unveiled, successfully extending debt maturities to at least 2031.
Attention now shifts to a critical shareholder vote scheduled for Tuesday, February 17, 2026. Shareholders of MTL Cannabis are set to decide on the proposed acquisition by Canopy Growth. The successful completion of this transaction is viewed as a pivotal component in strengthening the company’s global platform and achieving its targeted synergy benefits.
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