European Expansion And Operational Improvements Will Unlock Cannabis Potential

Key Takeaways

• Expanding internationally and innovating with premium and alternative products are expected to drive sustainable revenue growth and strengthen brand equity across key markets.
  
• Cost-cutting measures and operational improvements aim to enhance margins and position the company for success, particularly if U.S. federal legalization advances.
  
• Margin pressure, regulatory risks, weak adjacent segment performance, continued losses, and market concentration threaten profitability and long-term revenue stability.

Catalysts

Engages in the production, distribution, and sale of cannabis, hemp, and cannabis-related products in Canada, Germany, and Australia.

• Accelerating international expansion, particularly in Germany and Poland, positions Canopy Growth to capture significant revenue upside as European cannabis markets grow, supported by ongoing regulatory reforms that are expanding the company's accessible addressable market and driving long-term top-line growth.
  
• Strategic focus on premium offerings, supply consistency, and operational execution in Canadian medical and adult-use segments has driven strong volume and distribution gains, supporting sustainable revenue growth and paving the way for improved gross margins as scale and product mix shift towards higher-value SKUs.
  
• Advanced cost rationalization initiatives-including automation, supply chain optimization, and targeted SG&A reductions-are expected to meaningfully improve net margins and earnings in the coming quarters by aligning the cost base with core revenue drivers and reducing structural overhead.
  
• Expected continued innovation (e.g., new product launches in vapes, international strain registration, new Storz & Bickel devices) is anticipated to enhance brand equity, tap into shifting consumer demand for alternative therapies and plant-based products, and drive incremental revenue growth across both medical and recreational channels.
  
• Strengthened U.S. market entry strategy, with operational improvements and ongoing preparedness for potential federal legalization, positions Canopy to unlock significant long-term revenue and margin expansion opportunities in the world's largest cannabis market should regulatory momentum continue.

Canopy Growth Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Canopy Growth's revenue will grow by 7.7% annually over the next 3 years.
• Analysts are not forecasting that Canopy Growth will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Canopy Growth's profit margin will increase from -187.9% to the average CA Pharmaceuticals industry of 0.6% in 3 years.
• If Canopy Growth's profit margin were to converge on the industry average, you could expect earnings to reach CA$2.2 million (and earnings per share of CA$0.01) by about August 2028, up from CA$-516.5 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 419.6x on those 2028 earnings, up from -1.0x today. This future PE is greater than the current PE for the CA Pharmaceuticals industry at 22.7x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 5.97%, as per the Simply Wall St company report.

Canopy Growth Future Earnings Per Share Growth

Risks

• Persistent gross margin compression in both the cannabis and Storz & Bickel segments, due to factors like higher production/labor costs, increased market supply leading to price deflation (particularly in Australia), and sales mix shifts away from higher-margin products/markets such as Poland, could continue to pressure net margins and delay the achievement of positive EBITDA.
  
• Regulatory changes and supply challenges in key international markets-evidenced by Poland's restrictions on online prescriptions and temporary disruptions-highlight the risk of unpredictable regulatory headwinds globally, potentially limiting or reversing revenue growth in those markets.
  
• Declining year-over-year revenue in premium vaporizer segment Storz & Bickel, compounded by macroeconomic headwinds and softer U.S. consumer demand, exposes Canopy Growth to ongoing risks of underperformance in this adjacent business line, which may impact consolidated revenue and gross profit.
  
• Ongoing operating losses, as shown by continued negative adjusted EBITDA and free cash outflows (despite improvement), call into question Canopy Growth's ability to achieve and sustain profitability, raising risks of further share dilution and strained balance sheet health.
  
• Heavy reliance on growth in Canadian and a narrow set of European markets (primarily Germany and Poland) exposes the company to concentration risk and competitive pressures; any stagnation or setbacks in these regions (from regulatory, supply, or competitive sources) could materially impact top-line revenue and long-term earnings potential.

Valuation

• The analysts have a consensus price target of CA$2.64 for Canopy Growth based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of CA$8.0, and the most bearish reporting a price target of just CA$0.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be CA$343.7 million, earnings will come to CA$2.2 million, and it would be trading on a PE ratio of 419.6x, assuming you use a discount rate of 6.0%.
  
• Given the current share price of CA$2.06, the analyst price target of CA$2.64 is 22.0% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.