Canadian cannabis giant Canopy Growth Corporation (TSX:WEED, NYSE:CGC)'s recent strategy shift towards its US assets is a “critical” move, according to analysts at Jefferies.
“Almost all of Canopy's value, in our view, is to come from its US assets,” the analysts wrote in a research note.
“The new structure they are pursuing — to take ownership of these assets — makes sense, therefore, and is arguably critical.”
According to the note, almost all of Canopy's future value is expected to stem from its US assets, prompting the restructuring move to consolidate and efficiently manage them under "Canopy USA."
While the US segment is anticipated to be profitable with a promising growth trajectory, Canopy's core operations offer little upside, with the focus primarily on solvency.
Despite progress in shoring up the balance sheet, challenges persist, including declining sales and margins. Jefferies updated its forecast, projecting FY25 sales at C$306.4 million and EBITDA at nearly C$29.3 million, reflecting the uncertain outlook.
“With the core the required listing vehicle for this, the immediate focus here is simply staying solvent,” Jefferies wrote.
“Progress is being made here, but still not out of the woods yet.”
Analysts maintain a "Hold" rating on the stock with a price target of C$10.63.