Yesterday, Canopy Growth Corporation (CGC) appointed Judy Schmeling as Chair of the Board of Directors, and Jim Sabia in principle as a member of the Company’s Board of Directors.
Schmeling, who also sits on the board of Constellation Brands Inc, has been a board member since Nov. of 2018. Sabia will act as an observer to the Board as he and CGC work toward the Health Canada processes associated with the appointment.
The recent game of musical chairs within the boardroom could be indicative of big changes to come, or it could simply be a response to the company’s underwhelming performance last year.
Thus far, Canopy Growth hasn’t done a great job of accurately identifying consumer demand trends, which was exemplified last quarter by nearly $27 million in product returns, much of that coming from a lack of demand for the company’s oil products.
This is telling that CGC may not have only miscalculated the demand for said products, but may have overestimated the trend itself. The verdict is still out on whether oils will be the hot seller that so many in the cannabis industry are betting they will be.
In Canopy Growth’s most recent earnings report, the company identified $15.9 million in product inventory that exceeded demand, or had become obsolete. This has many believing that CGC was not only overly optimistic about oils in general, but pursued the wrong market segment altogether.
By contrast, competitors like Aurora Cannabis (ACB) have focused less on oils, placing more emphasis on expanding a global footprint.
What about the beverages?
Now the million dollar question is: Will the same thing happen with the beverage market? With its close ties to beverage behemoth Constellation Brands (STZ) and its cozy boardroom alliances, it’s no secret that Canopy Growth is doubling down on the cannabis-infused beverage market. And that’s precisely the issue because the beverage category is yet another unproven market.
On a positive note, Canopy seems to be gaining traction in same store performances. In the most recent quarter, same-store sales from company-owned retail outlets jumped 17 percent. When factoring in new store openings, that number equates to 24 percent.
With the province of Ontario slated to open another 20 stores by April 2020, that could bode well for Canopy Growth and provide needed relief to the retail bottleneck that has been pinching the industry overall.
During the last 3 months, 7 out of 16 Wall Street analysts haven given CGC stock a Buy rating, while the majority maintain a Hold. The stock’s consensus target price remains at $22.61, with a downside potential of approximately 6%.
Cannabis and criminal justice reform
In other news, actor Seth Rogan’s cannabis brand Houseplant has been making headlines with its commitment to social inequity as it relates to cannabis legalization and criminal justice reform. Canopy Growth has partnered with Rogan’s Houseplant brand.
Back in September, Rogen stepped up for the National Expungement Week (N.E.W.) initiative, which rallies around injustice related to cannabis convictions. The initiative contends that criminal records resulting from minor cannabis offenses can and should be expunged.
The U.S.-based campaign was designed to provide legal relief and expungement of criminal records to 77 million Americans who suffer from these consequences every year.
Canopy Growth Corp. (CGC) . Year-to-date, CGC has declined N/A%, versus a 24.80% rise in the benchmark S&P 500 index during the same period.
About the Author: Eric Bowler
Eric Bowler is an accomplished journalist providing in-depth insights for more than two decades. Over the past several years his focus has been on the marijuana industry, with a special interest in cannabis growth stocks. His daily coverage of the industry keeps him on top of the key trends with the goal of helping investors make well-informed decisions.