Bank Of America Remains Bullish On Canopy Growth Despite The 'End Of An Era'

Canopy Growth Corp CGC has parted ways with founder and co-CEO Bruce Linton and this marks an "end of an era," according to Bank of America.

The Analyst

Bank of America's Christopher Carey maintains a Buy rating on Canopy Growth with a $53 price target.

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The Thesis

Canopy's growth from a $200 million company to today's $14 billion valuation was due in part to Linton's ability to remain "ahead of the curve," Carey wrote in a note. His departure from Canopy is a "net negative" for the company's next chapter, which will be run for the time being by Mark Zekulin. He is less of a public figure, but has been with the company since the beginning.

Canopy's priorities are also different today than in the past as management need to operate with a level of financial discipline "that has been lacking," Carey said. Under a new leadership structure, Canopy will likely become a "more rigorous" entity with a "financial positive" focus. It's not yet certain the company will lose its "be-first mentality," which helped it rise to its leadership position today.

Carey said the company needs to explain its long-term investment versus near-term profit dynamics and how it can establish long-term leadership if strategic priorities are changed.

Bottom line, Canopy Growth is still "the most scaled and capitalized" cannabis company in the space.

Price Action

After falling more than 5% early Wednesday morning, Canopy Growth's stock closed the session higher by 2.45% at $41.06 per share.

Related Links:

Canopy Growth's Bruce Linton Out As Co-CEO: 'My Turn Is Over'

Bruce Linton Tells CNBC He Was 'Terminated' From Canopy Growth