Dilution Dampens Canopy Growth’s Outlook Despite Operating Progress

Canopy Growth continues to push forward on the business front, but the momentum is being offset by equity dilution, according to Roth Capital Markets. The broker trimmed the stock’s price objective to C$5.00, down from C$8.00, while keeping a Buy rating. The key concern: a substantial increase in the share count that makes upside harder to realize even if the fundamentals improve.

Important takeaways
- Price target reduced from C$8.00 to C$5.00, with a Buy stance retained
- Share count surged from 86.8 million to 345.5 million
- Q3 revenue: C$74.5 million, unchanged versus the prior year
- Adjusted EBITDA loss: C$3 million (the tightest quarterly loss on this metric to date)
- Cash: C$371 million; Net cash: C$146 million (as of December 31, 2025)

Analyst view: dilution weighs on the share price

Roth analyst Bill Kirk, in a Tuesday note, cut Canopy Growth’s price objective to C$5.00 from C$8.00, while leaving the Buy rating intact. The core concern is ongoing equity issuance and the resulting dilution. Kirk highlights that the number of shares rose from 86.8 million (Q2 FY2025) to 345.5 million, which he argues makes share-price gains substantially more challenging even if the operating picture improves.

The analyst also notes some potential relief on the dilution front. Much of the share issuance occurred in Q2 and Q3, suggesting additional dilution in upcoming periods could be less likely. Additionally, Canopy completed a strategic recapitalization in January and extended debt maturities to 2031, which could reduce near-term dilution pressure.

Quarterly update: revenue steady, losses narrowing

Canopy Growth reported in the results published on February 6 for Q3 FY2026 a net revenue of C$74.5 million, flat against the prior-year level. On the profitability side, the Adjusted EBITDA loss stood at C$3 million, marking the narrowest quarterly loss on this measure to date and an improvement of about 17% year over year. The net loss declined by roughly 49% year over year. Free cash flow dropped, with a cash outflow of C$19 million, down from C$28 million previously.

At quarter end, Canopy Growth held C$371 million in cash and cash equivalents. The net cash position was C$146 million as of December 31, 2025.

Canada performance and an upcoming acquisition

Domestic business showed strength in Canada: recreational cannabis revenue reached C$22.9 million, up 8% from a year earlier, while medical cannabis revenue rose to C$22.5 million, up 15% year over year. International cannabis revenue was C$6.2 million, down 31% year over year but up 22% quarter over quarter, reflecting improving supply conditions in Europe.

Storz & Bickel generated revenue of C$22.9 million, down 9% year over year but up 45% versus the prior quarter, supported by seasonally robust demand and the launch of the VEAZY device.

CEO Luc Mongeau described improving fundamentals and a more focused, integrated operating model. CFO Tom Stewart stated that Canopy Growth is targeting positive Adjusted EBITDA in fiscal year 2027. Since March 1, 2025, the company has achieved C$29 million in annualized cost savings.

On the acquisition front, Canopy confirmed that the planned takeover of MTL Cannabis remains on track and is expected to close within this quarter.

@ boerse-global.de | CA1380351009 DILUTION