Canopy Growth vs. Curaleaf: How To Choose The Better Cannabis Stock?

The pandemic has negatively impacted several industries but the cannabis or marijuana industry is certainly not one of them. In fact, cannabis sales increased since the pandemic in several markets in North America. In Illinois alone, cannabis sales touched a record $47.6 million in June, up from $44.3 million in May. As per Statistics Canada, cannabis retail sales in the country…

rose 7.9% month-over-month in June to C$201 million.

Anxiety due to the COVID-19 outbreak, stay-at-home orders, and greater availability of products are being cited as some of the reasons for the increased sales.

Cannabis is legal in Canada both for recreational and medical purposes. In the US, more states are expected to legalize cannabis soon. And, there are hopes of cannabis being legalized at the federal level too.

Against this backdrop, we will use TipRanks’ Stock Comparison tool, to see whether Canopy Growth or Curaleaf is a better cannabis bet.

This image has an empty alt attribute; its file name is CGC-vs-Curaleaf.png
This image has an empty alt attribute; its file name is CGC-vs-Curaleaf.png

Canopy Growth (CGC)

Canada-based Canopy Growth is one of the largest cannabis producers. Mounting losses caused the ouster of the company’s co-founder Bruce Linton as the co-CEO in June 2019. Mark Zekulin served as CEO of the company till he was replaced by alcoholic beverage giant Constellation Brands’ finance head David Klein.

Canopy Growth continued to post losses in the first quarter of fiscal 2021, which ended on June 30. However, investors were pleased to see a lower-than-anticipated loss. The fiscal first-quarter net loss reduced 34% Y/Y to C$128.3 million. The company’s adjusted EBITDA loss came in at C$92 million.

Higher revenue, more than 18% reduction in headcount and lower expenses helped in trimming the losses. Canopy Growth has also scaled back or shut down facilities in many countries as part of its restructuring efforts.

Canopy Growth’s first-quarter revenue grew 22% Y/Y to C$110.4 million. However, the sequential growth was only 2%. The Y/Y growth in the company’s revenue was due to higher medical cannabis sales in Canada and Germany, increased sales of Storz & Bickel vaporizer, and the contribution from C3 and This Works, which were acquired last year.

However, the company’s Canadian recreational revenue declined 11% Y/Y due to the impact of intense competition for dried flower-based products and retail store closures due to the pandemic.

Following the results, Canaccord Genuity analyst Matt Bottomley raised his price target to C$22 from C$21 and reaffirmed his Hold rating.

Explaining the reason for a higher price target, the analyst said, “On the back of better than anticipated quarter on the top line as the company reduced its free-cash burn by >40% from only a quarter ago, we have updated our model to account for a slightly faster path to break-even (profitability).”

Canopy Growth has a Hold consensus rating based on 3 Buys, 10 Holds and 3 Sells. CGC stock (on NYSE) has declined 24% year-to-date. But there could be a possible upside of 16% based on an average price target of $18.69.

One of Canopy Growth’s strength is that it is…

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