TLDR
- Canopy Growth stock surged 35% in pre-market trading to $1.53, pushing market cap above $400 million
- Rally triggered by reports that President Trump plans to reclassify marijuana as Schedule III drug
- Reclassification would ease tax burdens and banking restrictions for cannabis companies
- Company’s recent quarterly revenue rose 6% to $67 million, but outstanding shares increased from 129 million to 332 million
- Canopy Growth’s balance sheet improved with cash rising to $298 million and long-term debt falling to $226 million
Canopy Growth stock price jumped over 35% to $1.53 in pre-market trading Friday following reports about potential federal cannabis policy changes. The surge pushed the company’s market capitalization above $400 million.
Canopy Growth Corporation, CGC
The rally came after The Washington Post reported that President Trump plans to instruct federal agencies to reclassify marijuana as a Schedule III drug. This would move cannabis from the same category as heroin to a lower tier alongside drugs like steroids and Tylenol with codeine.
Canopy Growth operates major brands including Tweed, Tokyo Smoke, Deep Space, Doja, and Ace Valley. The company also owns Spectrum Therapeutics, its medical cannabis division.
Other cannabis stocks saw similar gains. Tilray Brands rose 34.88% while Aurora Cannabis jumped 20%.
Cronos Group gained 19% and SNDL climbed 34.7%. The MSOS ETF, which tracks cannabis stocks, surged over 30% in pre-market activity.
This isn’t Trump’s first time moving cannabis markets. In September, his Truth Social post promoting CBD benefits for seniors sparked a similar rally.
Mid-year, his comments about rescheduling marijuana pushed CGC stock from $1.02 to $1.93. The pattern shows how policy speculation drives trading in this sector.
Mixed Business Performance
The rescheduling news comes as Canopy Growth’s latest financial results paint a complicated picture. Second fiscal quarter revenue increased 6% to $67 million.
Cannabis business revenue grew 12% to $51 million. Canadian adult-use and medical cannabis sales posted double-digit growth.
International markets declined during the quarter. The Storz & Bickel division saw revenue drop 10% to $16 million, blamed on economic uncertainties.
The company’s balance sheet showed improvement. Cash and short-term investments reached $298 million.
Long-term debt fell from $299 million in March to $226 million. However, outstanding shares increased dramatically from 129 million in January to 332 million currently.
This share dilution reduces earnings per share for existing investors. It’s a common concern as struggling companies raise capital.
A Schedule III reclassification would bring practical benefits for Canopy Growth’s U.S. operations. Companies would face different tax regulations that could improve profitability.
Banking access would become easier as federal restrictions loosen. Investment capital might flow more freely into the sector.
The change is expected to take place early next year according to Axios. Trump previously hinted at reclassification in August.
The move continues a process that President Biden started. Biden’s administration began reviewing cannabis scheduling, though progress was slow.
Technical analysis shows CGC stock formed a double-bottom pattern at $1.02. This is typically considered a bullish signal.
The stock recently rebounded from $1.02 to $1.40 before Friday’s surge. Analysts suggest the stock could test resistance at $1.50.
However, volatility is likely to continue as rescheduling debates unfold. A drop below $1.02 support would invalidate the bullish outlook.
The cannabis sector faces ongoing regulatory uncertainty despite recent optimism. November saw Congress re-criminalize certain THC products that were legalized in the 2018 Farm Bill.
The conflict stems from how hemp is defined and total THC content. These policy shifts create whiplash for investors trying to navigate the space.
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