Should You Buy Canopy Growth Stock on the Rebound?

Canopy Growth (NASDAQ: CGC) started trading publicly in Canada in 2014 via a reverse merger (then known as Tweed). It eventually got a listing in the United States in 2018, becoming one of the first U.S.-traded marijuana companies. The stock rocketed higher as investors jumped into the sector, expecting growth to be driven by the legalization of marijuana in more and more regions.

But Wall Street has a habit of getting too excited about hot investment ideas. The marijuana sector's growth didn't live up to expectations, and investors went from exuberance to despair. Today, Canopy Growth is a penny stock. But the first quarter of fiscal 2027 actually showed broad business improvement. Is the business rebound worth buying into?

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Canopy Growth is in better shape than it was, but at a cost

In early 2026, Canopy Growth announced that it was undergoing a strategic recapitalization. Essentially, it reduced its debt, strengthening its balance sheet, by issuing equity to bondholders. Shortly thereafter, the company acquired MTL Cannabis, a Canadian medical marijuana company. That expanded the company's position in this important niche of the marijuana industry.

However, the recapitalization left the company with more shares, which diluted current shareholders. And the MTL Cannabis acquisition was an all-stock transaction, which required issuing even more shares. Over the past year, the share count has increased by over 25%. And over the past three years, the increase is over 400%. Canopy Growth is in a better business position, but the improvement hasn't come cheaply.

Notably, the stock has been trading in penny-stock territory since mid 2025. This is a high-risk investment, no matter how you look at it. And most investors should not consider buying it. But the pot company did just have a strong quarter.

CGC data by YCharts

Canopy Growth's first quarter turned for the better

In the first fiscal quarter of 2027, Canopy Growth reported 13% year-over-year revenue growth. But the real story was that all of its business divisions contributed to the top-line improvement. Its Canadian medical marijuana business saw sales growth of 22%; its Canadian adult-use business grew sales by 10%; its international cannabis business grew sales by 10%; and the company's Storz & Bickel business increased sales by 6%.

That wasn't the only good news. Gross margin improved to 27%, two full percentage points higher than the year-earlier period. And the company's net loss was 68% lower than it was a year earlier. Of course, losing money isn't great, but losing less is at least moving in the right direction. The company also refreshed its brand image to help further reset the business.

If you are an extremely aggressive investor, you might be tempted to take a second look at Canopy Growth. However, one quarter doesn't make a trend, and the business revamp is still relatively fresh. So, even then, investors should probably monitor the stock rather than jump aboard. Yes, that may mean losing out on some early stock gains if business performance continues to improve. However, it will save you from buying into a marijuana story that has already fallen far short of investor expectations before and could easily do so again.

Canopy Growth isn't the only one buying

Canopy Growth isn't the only company that's consolidating the marijuana sector. So, more broadly speaking, the industry may be entering a new phase. For example, Tilray Brands (NASDAQ: TLRY) recently acquired Brew Dog, expanding its beverage business. And Aurora Cannabis (NASDAQ: ACB) completed an acquisition only to find itself the target of a hostile takeover by peer Curaleaf. Something important may be happening in the marijuana sector. However, it still isn't clear which companies will end up as the winners in this consolidation effort.

So for most investors, it is probably better to keep a penny stock like Canopy on the watch list for now. If the business turnaround continues, it may be worth reconsidering, eventually. But there are just too many moving parts to keep track of right now for all but the most aggressive investors.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool recommends Tilray Brands. The Motley Fool has a disclosure policy.