Canopy Shares Remain Undervalued in Q2 Despite Canada’s Market Weakness and U.S. Market Uncertainty

Following a slower second fiscal quarter result for no-moat Canopy Growth, we maintain our Canadian dollar fair value estimate of CAD 14 and lower our U.S. dollar-denominated fair value estimate slightly to $10 from $11 on exchange rates. Net revenue grew 7% sequentially in the second quarter, up from a 1% decline in the first quarter. Our full-year net revenue forecast remains at about CAD 450 million, 18% lower than 2021 reflecting strategic pivots. But our forecast for full-year adjusted EBITDA losses widens to CAD 369 million from CAD 324 million on continued struggles in the Canadian cannabis market. The impact on our fair value is minimal as these ongoing challenges do little to affect our long-term outlook.