The definition of “penny stocks” includes shares of companies trading below $5, and there are quite a few in 2022. It’s funny to think that at one point in 2021, low-priced stocks were hard to come by unless you were looking at OTC penny stocks. But with the stock market down this year, the trend is much different. There are plenty of previous “market leaders” trading much lower. Whether it’s the latest round of Cathy Wood stocks or other growth names, bearish sentiment is ruling the stock market today.
It isn’t just penny stocks getting the short end of the stick this year. Look at companies like Netflix (NASDAQ: NFLX). Shares of the streaming company are a far cry from what they once were at the end of last year. NFLX stock has fallen over 70%, and other streaming companies have been brought down with it. We discussed FuboTV (NASDAQ: FUBO) earlier this month in the article: Will fuboTV Inc. (FUBO) Be On Your List Of Penny Stocks In 2022? At the time, FUBO stock was trading north of $6 per share. In the last few weeks following the update, company shares have dropped to lows under $4.
Are Penny Stocks Worth It?
FuboTV isn’t the only company that has faced this type of market resistance. There are plenty of household name stocks that have become penny stocks. We’ve discussed Nio Inc. (NYSE: NIO) as one of the more famous names. That’s because NIO stock dropped to under $2, but to the benefit of shareholders, it managed to revitalize itself, which is directly reflected in the market. Nio shares remain well above the $5 threshold and even tested highs of nearly $67 at one point last year.
Household Stocks, Now Penny Stocks
- Stryve Foods, Inc. (NASDAQ: SNAX)
- 23andMe Holding Co. (NASDAQ: ME)
- BuzzFeed, Inc. (NASDAQ: BZFD)
- Hims & Hers Health, Inc. (NYSE: HIMS)
- The Beachbody Company, Inc. (NYSE: BODY)
- ContextLogic Inc. (NASDAQ: WISH)
- SmileDirectClub Inc. (NASDAQ: SDC)
- Clear Channel Outdoor Holdings Inc. (NYSE: CCO)
- Express Inc. (NYSE: EXPR)
- PartyCity Holdco (NYSE: PRTY)
Recognize any of these companies? They’re some of the top brands you’ve probably heard of, seen an advertisement for, or been a customer of. Believe it or not, they are now trading publicly as penny stocks. Based on the bearish trends in the stock market today, what company will become the next “new” penny stock? This is what might have been asked about certain marijuana stocks like Canopy Growth Corp. (NASDAQ: CGC).
Will CGC Stock Become A Penny Stock?
I will preface this with a statement that CGC was once a penny stock. During the early days of the legal cannabis boom, Canopy Growth traded Over-The-Counter under the symbol TWMJF and below $5 per share. Since then, a lot has changed for the company, including corporate growth and even a multi-billion dollar investment from alcohol juggernaut Constellation Brands (NYSE: STZ).
The last 14 months have been less than stellar for the cannabis industry and CGC stock. Constant head fakes related to legalization in the US and large cash burn have added to the bearish sentiment surrounding the marijuana stock. Recent headlines suggest that Canopy is taking aim ad addressing its revenue model by reducing overhead.
This week Canopy Growth announced that it would implement specific initiatives to “drive efficiency” and “accelerate its path to profitability.”
What does this mean? The company plans on reducing its headcount, for one. This comes in tandem with its goal of reducing the Cost of Goods Sold by lowering the per-gram cultivation costs. There’s also a plan to include contract manufacturing for certain products. In doing this, management expects to generate savings on the cost of goods sold between $30 million and $50 million.
“The savings and operational efficiencies generated through these additional steps reinforce our commitment to driving Canopy to profitability…Achieving profitability in our Canadian business is critical to the success of our Company and will ensure we can continue investing in our key strategic growth areas, including US THC to build significant long-term value,” explained Judy Hong, Canopy Growth’s Chief Financial Officer, in this week’s announcement.
A spokesperson from the company told MarketWatch that it plans on laying off “about 250 employees” in this cost-cutting process.
CGC Stock Forecast
Shares have been down significantly over the last year. The company is laying off hundreds of employees and has other cost-cutting strategies it plans to deploy. What do analysts think about CGC stock right now, considering earnings season is heating up?
- Cantor Fitzgerald CGC Stock Forecast: Neutral, Price Target Increase from C$9.60 to C$11
- Barclays CGC Stock Forecast: Underweight, Price Target Cut from $14 to $9
- Alliance Global Partners CGC Stock Forecast: Neutral, Price Target Cut from C$18 to C$11
Like other companies falling on hard times this year, analysts appear to hold higher projections than current price levels suggest. In the above list of analysts, the lowest rating is still significantly higher than where the CGC stock price sits.
New management changes seem to have also sparked some interest in the company. Judy Hong and Jonathan Di Tosto joined the executive team earlier this year. Hong, as the new CFO, has decades of experience at Goldman Sachs and served as Canopy’s VP of Investor Relations when she joined in 2019. Di Tosto takes the helm of COO and comes into the position after his time as VP of supply chain oversight with the company.
Should You Buy CGC Stock?
The ultimate question: should you buy CGC stock right now? Shares of the cannabis company came within 6 cents of breaking back into the penny stock range during the morning session on April 27. Despite bouncing, questions remain about what the future may hold for Canopy Growth. As the company works through its cash burn issues and puts new management in critical positions, hopes likely are that things will turn around.
However, there are plenty of headwinds to keep in mind. Legislative uncertainty in the US market could play a leading role. Meanwhile, it’s yet to be seen if the cost-cutting measures will have a meaningful impact on Canopy’s bottom line. You’ve also got the CGC stock forecasts to account for. Though the price targets remain higher than current levels, ratings are mixed.
If CGC is on your watch list right now, leave a comment about your outlook for the company and whether or not you think new lows are in store.
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