Canopy Growth Earnings: Losses Narrow, but Cash Burn and Dilution to Existing Equity Will Continue

We don’t expect to make significant changes to our $0.80/CAD 0.90 fair value estimate for no-moat Canopy Growth after the release of fiscal 2024 second-quarter results. Even though the shares trade well below our valuation, we reiterate our Extreme Morningstar Uncertainty Rating. In particular, we think existing equityholders are likely to see significant dilution as cash burn continues and debt matures. During the quarter, the share count grew another 30% to more than 716 million. We think the dilution threat remains and model that shares could more than double as breakeven free cash flow remains years away.