CGC

Canopy Growth ($CGC) CEO Signals Bottom with $50K Personal Stock Buy After 83% Crash

09/23/2025 20:20

Canopy Growth ($CGC) is presenting investors with a stark choice. This Canadian cannabis giant's stock has plummeted over 83% from $8.00 in June 2024 to current levels around $1.36, but newly appointed CEO Luc Mongeau sent a powerful signal to the market by purchasing 27,469 shares with his own money on September 22. Canopy Growth is Canada's largest cannabis company, headquartered in Smiths Falls. The company develops, produces, and markets medical and recreational cannabis products under brands including Tweed, 7ACRES, and Deep Space. Operating across Canada, Germany, Australia, and the US, it offers dried flower, pre-rolls, extracts, edibles, vapes, and oils. Recent acquisitions of Wana Brands and Mountain High Products have expanded its US hemp-derived product offerings. The CEO's purchase stands out dramatically in the insider trading data. Of 32 insider transactions recorded over the past year, 31 were sales, mostly automatic dispositions to cover tax obligations on restricted stock unit (RSU) vestings. Mongeau's purchase of approximately $50,000 worth of shares at $1.82 per share represents a strong vote of confidence in the company's undervalued state. Mongeau joined the board as an observer in early 2023, became a full director in February 2024, and was named CEO successor in November 2024, officially taking the helm on January 6, 2025. His stock purchase appears far from ceremonial—it signals genuine conviction about the company's prospects at what may be historic lows. However, Canopy Growth faces substantial challenges. Q4 fiscal 2025 results showed revenue of CAD 45.3 million, significantly missing consensus estimates of CAD 71.84 million. Net loss per share reached $0.94 versus expectations of $0.28. On an annual basis, the company posted a net loss of CAD 516.47 million with a profit margin of -186.42%. Despite these headwinds, meaningful restructuring is underway. The company is executing a cost reduction program targeting CAD 20 million in annual operating expense savings, with over half already achieved. It also prepaid $100 million of senior secured term loans, reducing annual interest expenses by $13 million. Cash and short-term investments of CAD 131 million provide a liquidity buffer for the near term. Industry sentiment is showing signs of change. Reports that President Trump is considering reclassifying marijuana as a less dangerous drug sparked a sector-wide rally on August 11, with Canopy Growth surging 26.3%. If reclassification occurs, it could reduce tax burdens, improve banking access, and attract institutional investors. Investors should watch for positive signals in the medical cannabis segment, which showed 16% growth in Canada with adjusted gross margins of 25%. International markets also showed resilience, with growth in Germany and Poland offsetting Australian market challenges. The Storz & Bickel vaporizer division plans new product launches in late 2025. Warning signs require careful attention, however. International revenue declined 35% due to regulatory changes, and Canopy USA investments have been written down from CAD 440 million to CAD 178 million. Acreage Holdings remains in default under its credit agreement, with forbearance only granted until June 1, 2025. Florida's rejection of recreational marijuana legalization also dampened US market expansion hopes. Looking at scenarios, the optimistic case involves marijuana reclassification, cost reduction benefits materializing, and accelerated medical market growth driving a significant stock rebound. The base case suggests gradual loss reduction through restructuring, with potential profitability by 2027. The risk scenario includes accelerated cash burn, further US investment impairments, and adverse regulatory changes leading to additional declines. Valuation metrics show extreme discounting, with price-to-sales at 0.89x versus industry averages of 3-5x, and enterprise value-to-revenue at 2.74x versus 4-6x industry norms. This suggests either severe undervaluation or market skepticism about survival prospects. In conclusion, Canopy Growth presents an extremely undervalued but high-risk investment opportunity. The new CEO's bold purchase provides a strong contrarian signal, but losses continue and industry uncertainty remains elevated. Policy changes like marijuana reclassification could generate substantial returns, while failure to execute turnaround plans poses significant downside risks. This opportunity suits risk-tolerant investors seeking cannabis sector exposure but remains inappropriate for stability-focused portfolios.