Canopy Growth stock price staged a strong comeback in the pre-market session as investors cheered the latest news on cannabis rescheduling. CGC jumped by over 35% to $1.530, pushing its market cap to over $400 million. So, will the stock’s gains hold?
Canopy Growth stock jumps amid rescheduling news
Canopy Growth is one of the biggest players in the crypto industry, where it offers brands like Tweed, Tokyo Smoke, Deep Space, Doja, and Ace Valley. It also owns Spectrum Therapeutics, its medical cannabis brand.
The CGC stock price is in a strong uptrend after the media reported that Donald Trump was considering rescheduling cannabis into a less dangerous drug, continuing a process that Joe Biden started.
Such a move would be highly beneficial to Canopy Growth and other companies in the industry. This explains why cannabis stocks like Tilray Brands and Green Thumb Industries are soaring. The closely-watched MSOS ETF jumped by over 30% in the premarket session.
This is not the only time that Donald Trump has fueled gains in the cannabis industry. Mid this year, he pushed the CGC stock price to a high of $1.93 from a low of $1.02 after revealing that he was considering rescheduling marijuana. It then soared after he promoted CBD for senior citizens on Truth Social, its social media platform.
A cannabis rescheduling would be a good thing for Canopy Growth, as it would make it easy to do business in the United States. It would also simplify how it does business and its banking operations.
Canopy Growth business is sending mixed signals
The most recent results showed that the company’s business was sending mixed signals. Its revenue rose by 6% in the second fiscal quarter to $67 million, a sign that its demand was steady.
Most of this growth was from the cannabis business, whose revenue rose by 12% to $51 million. Canada’s adult-use and medical cannabis revenue soared by double digits, while its international markets dropped.
On the other hand, the Storz & Bickel revenue dropped by 10% to $16 million, which the management blamed on the growing economic uncertainties.
There were other potential catalysts in the report. For example, the company’s balance sheet improved, with its cash and short-term investments rising to over $298 million. Its long-term debt dropped from $299 million in March to $226 million.
However, the company’s balance sheet improvement has coincided with the soaring outstanding shares. Its shares jumped to 332 million from a low of 129 million in January. An increasing number of outstanding shares normally leads to dilution, which reduces the earnings per share.
CGC stock price technical analysis
The daily chart shows that the Canopy Growth stock price dropped from a high of $1.93 to a low of $1.02. It then rebounded to $1.40, its highest level since October.
The rebound happened as the stock formed the highly bullish double-bottom pattern at $1.02. This is one of the most bullish patterns in technical analysis. It also formed a bullish divergence pattern.
Therefore, the stock will likely have a strong bullish breakout as expectations of rescheduling continues. This means that the stock may hit the resistance at $1.50.
However, the rebound may maintain its volatility as the rescheduling debate continues. A drop below the support at $1.02 will invalidate the bullish outlook.
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