From $500 to $1: Is Canopy Growth a Dead Stock Walking or the Ultimate Turnaround Play?

It's an understatement to say Canopy Growth (NASDAQ: CGC) has been an abysmal investment. Even among marijuana stocks, which have fallen considerably since the early 2020s, shares in this Canada-based cannabis purveyor is a huge underperformer.

During the past five years, the stock has fallen by about 99.6%. In other words, if you invested $1,000 five years ago, your position today would be worth just $4. Sure, sometimes stocks that have taken a big tumble can experience a proverbial dead cat bounce, producing stunning gains from their lows, on just a small amount of positive news.

Yet although upside potential may seem high with an out-of-favor business, a stock down 99% can still drop by another 99%. That may not happen with Canopy Growth, but as long-standing issues persist, further downside could be in the cards.

Canopy Growth largely remains the same old sad story

Canopy Growth was an early mover in the cannabis sector when Canada legalized marijuana in 2018. However, with so many competitors operating in a relatively small market, profitability has been elusive. It doesn't help that illegal sales still make up 30% of the market.

At the same time, Canopy has been unable to enter the U.S. market directly. As a Nasdaq-listed company, it cannot directly own a U.S. cannabis business until marijuana is legalized on the federal level. Canopy has economic exposure to U.S.-based cannabis businesses through its Canopy USA unit but has so far been unable to consolidate Canopy USA's figures into overall results.

As a result, Canopy reported deep losses and heavy cash burn for several years. To cover these losses, the company has relied on selling equity to raise capital, resulting in shareholder dilution. With this in mind, it's not surprising that the stock has been in a serious downward spiral.

The worst part yet is it's not as if the story has fully changed here. Political gridlock means long odds of any change in U.S. federal marijuana laws. At the same time, while Canopy's losses have narrowed, they are still coming in at a pace that suggests that the company will need to raise cash once again.

Image source: Getty Images.

There are better alternatives out there

Canopy has narrowed losses in recent quarters. The company has about $371 million Canadian ($270.8 million) in cash. However, significantly countering this cash position is about CA$225 million in long-term debt. Not only that, while negative operating cash flow narrowed from CA$132.6 million during the nine months ended Dec. 31, 2024, to just CA$45.5 million during the same period in 2025, these results still demonstrate how reaching profitability remains a work in progress.

If losses persist and other obligations require Canopy to put its war chest to work, who knows? The company could tap into dilutive equity financing once again. Yes, in the event that this stock's main catalyst, U.S. federal legalization of marijuana, plays out, concerns about cash burn and dilution will become secondary.

However, instead of buying a company with many past and ongoing issues, why not buy a financially stronger business that has the exact same catalyst? For this, other marijuana and CBD stocks, like Green Thumb Industries (OTC: GTBIF) and Cronos Group (NASDAQ: CRON), come to mind. These companies are either profitable or cash-rich, leaving them perhaps better positioned to capitalize on legalization if it arrives sooner than currently expected.

Even buying marijuana exchange-traded funds (ETFs), which hold a basket of marijuana stocks, could be a better choice than Canopy Growth -- at least if your main interest is long-term exposure to the potential of federal legalization.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Cronos Group. The Motley Fool recommends Green Thumb Industries. The Motley Fool has a disclosure policy.