Should Canopy Growth Stock Be in Your Portfolio Post Q3 Earnings?

Canopy Growth Corporation CGC reported third-quarter fiscal 2026 (year ending March 2026) results, wherein the top and bottom lines beat their respective consensus mark.

This Canada-based company posted a loss of 1 cent, reflecting a significant improvement from a loss of 76 cents in the year-ago period. Sales remained relatively flat year over year at $53.5 million (~C$75 million).

Long-term investors typically focus beyond a single quarter’s numbers and assess broader fundamentals. Let’s explore the company’s fundamentals to better understand how to play the stock after its latest results.

CGC’s Domestic Market Masks International Pressures

Canopy Growth’s cannabis operations continue to show steady improvement across both recreational and medical channels. In the third quarter, total cannabis revenues advanced 4% year over year, reflecting sustained strength in Canada that helped counterbalance prior international volatility.

Within the Canadian adult-use market, sales increased 8% year over year. Growth was fueled by ongoing traction in infused pre-roll joints (PRJ) and new All-In-One (AIO) vapes under the Tweed, 7ACRES and Claybourne banners. Medical cannabis sales in the country rose 15%, supported by growth in insured patients and larger order volumes.

This uptake offset the softer sales performance of Canopy’s international cannabis division and its Storz & Bickel subsidiary during the quarter. International cannabis sales were affected by the ongoing supply-chain challenges in Europe. Net revenues from Storz & Bickel were down owing to lapping strong sales and continued consumer economic uncertainty.

Canopy’s overall gross margins slipped 300 basis points to 29%, reflecting lower sales of higher-margin cannabis in international markets and increased inventory provisions.

Canopy expects continued strength in its Canadian cannabis business, driven by innovation in PRJ and vapes, improved flower quality and expanding distribution. The medical segment remains supported by steady patient growth, while additional cost savings are being implemented to offset potential reimbursement headwinds. With scale benefits from the pending MTL acquisition, CGC intends to focus on margin improvement and progress toward positive adjusted EBITDA in fiscal 2027.

Management expects continued sequential improvement in Europe through the fourth quarter and into fiscal 2027 as flower supply expands, strain availability increases, and EU GMP progress strengthens export capabilities, positioning the region as a key growth driver next year. For Storz & Bickel, management cautioned that the third quarter is historically its strongest quarter, implying softer sequential performance in the fourth quarter.

Stiff Competition in Targeted Markets

Canopy Growth competes in an overcrowded market against the likes of Curaleaf Holdings CURLF and Tilray Brands TLRY.

Each of these players is expanding its footprint beyond domestic borders, particularly into markets such as Europe. This expansion could lead to more aggressive competitive moves and further consolidation across the sector.

CGC Stock Performance and Estimates

Shares of Canopy Growth have plunged 40% over the past year compared with the industry’s 16% decline, as seen in the chart below.

Bottom-line estimates for fiscal 2026 and 2027 have remained stable in the past 30 days.

How to Play CGC Stock?

Although Canopy’s Canadian operations are showing signs of stabilization and management is targeting positive adjusted EBITDA in fiscal 2027, overall business visibility remains limited. International uncertainty, competitive intensity and recent gross margin contraction highlight that a durable profitability turnaround is yet to be established.

CGC currently carries a Zacks Rank #4 (Sell), which suggests that the stock may be vulnerable to volatility and carry elevated risk. Investors may prefer to wait for clearer evidence of sustained profitability and margin expansion before considering exposure to this stock.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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