Canopy Growth's Medical Marijuana Sales Are Soaring. Is the Beaten-Down Stock Ready to Rebound?

Companies try to highlight the best news when they report earnings. That's to be expected, but you need to go into earnings season knowing you have read beyond the headlines. Canopy Growth (NASDAQ: CGC) reported huge growth in its medical marijuana business, which saw revenues increase 27% in the fourth quarter of fiscal 2026 and 17% for the full fiscal year. The rest of the business was a bit more mixed.

The good news and the less-than-good news

There's no question that Canopy Growth's medical marijuana business is doing well right now. It is also worth noting that the company recently bought MTL Cannabis, a move that should solidify its already strong position in the Canadian medical marijuana market. The strong growth in medical marijuana revenues highlights why the company is leaning into this division.

Image source: Getty Images.

The problem is that this isn't the company's only business. Its recreational marijuana business increased revenue by 20% in fiscal 2026, but the fourth quarter saw only a 1% increase. While the company attributes the full-year growth to "growth in infused PRJ offerings and new All-In-One vaporizers launched early in the fiscal year," the fourth quarter's 1% revenue growth suggests it ended the year on a weak note. That hints this division's outlook may not be as robust as the full-year growth suggests.

Meanwhile, the company's international cannabis sales rose 68% in the quarter, but fell 7% year over year. Supply chain issues were highlighted as a problem earlier in the year. Once again, the outlook is less clear than investors may like. And then there's the Storz & Bickel vaporizer business, which saw sales decline 14% for both the full fiscal year and in the fourth quarter.

Not enough good news to make Canopy Growth a buy

It is likely to require more than one strong division for Wall Street to get excited about Canopy Growth again. But there's still some more bad news to consider. Notably, the company's gross margin fell four percentage points in the fourth quarter and six percentage points for the full fiscal year.

Not surprisingly, Canopy Growth reported negative earnings again in fiscal 2026. In fact, it hasn't reported positive earnings since it went public, more than a decade ago. Now add in the fact that it recapitalized its balance sheet in fiscal 2026, exchanging shares for debt, and most investors should probably watch from the sidelines.

Could Canopy Growth's stock rally from here? Sure. But with only one business clearly performing well, only the most aggressive investors should probably bet on this penny stock having a sustained rally.

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