Canopy Growth Shares Face Reality Check as U.S. Regulatory Hopes Narrow

A recent executive order from Washington has prompted a sharp reassessment of Canopy Growth's stock, dealing a significant blow to investor optimism surrounding a major U.S. expansion. The order reschedules cannabis to Schedule III, but explicitly limits this change to medical use. This clarification has effectively removed the market premium that was built on expectations of a broader, tacit federal acceptance of the adult-use recreational market.

Consequently, the addressable market for a company like Canopy Growth, which requires federal legality to formally enter the United States, is now considerably smaller than many had projected. The stock has faced substantial selling pressure as a result.

The realization that the "adult-use premium" must be stripped from valuations has triggered a wave of selling across the cannabis sector. U.S. Multi-State Operators (MSOs), which operate in state-legal recreational markets but remain federally illegal, have been particularly hard hit. The hope for near-term uplisting to major U.S. exchanges has been dashed for now.

• Shares of Cresco Labs and Curaleaf posted double-digit percentage declines.
• Canopy Growth stock fell by more than 12%, dropping to $1.48. This move erased speculative gains that had accumulated in prior sessions.

A key positive remains: the confirmed elimination of the punitive tax burden under Section 280E, which accompanies the Schedule III reclassification, will provide meaningful cash flow relief for U.S. operators. However, for Canadian companies like Canopy Growth, whose U.S. entry strategy is tethered to federal legality, the timeline for a full-scale entry has been pushed further into the future. The prospect of consolidating U.S. revenues remains distant.

The Constrained U.S. Market in Perspective

The distinction between medical and recreational use fundamentally alters the U.S. market outlook. While research firm BDSA projects the total U.S. cannabis market to grow to approximately $46 billion by 2028, with the global market reaching about $58 billion, the majority of this growth is expected to come from the expansion of adult-use (recreational) markets.

The new federal framework confines legality strictly to the medical domain. For Canopy Growth, this implies:

Should investors sell immediately? Or is it worth buying Canopy Growth?

• Its accessible share of the projected $46 billion U.S. market shrinks to the smaller, slower-growing medical segment.
• The previously valued option for a broad entry into the recreational market has lost substantial substance.

Investors are now forced to recalibrate their revenue potential and valuation models based on this narrower pathway.

Underlying Challenges and Market Realities

This setback compounds Canopy Growth's existing challenges. The company executed a 1-for-10 reverse stock split in December 2023 to maintain its Nasdaq listing. It continues to grapple with a high cash burn rate and a saturated domestic market in Canada.

A stark contrast exists between headline market projections and on-the-ground realities in mature markets. Despite BDSA's $46 billion U.S. volume forecast suggesting robust growth, local markets are characterized by intense price pressure and fierce competition. For Canopy, the narrative of a future U.S. entry had long been the central driver for investor optimism.

That narrative lever has now been shortened by the "medical only" restriction. Under the current political landscape, this framework is unlikely to change fundamentally until at least the end of the current U.S. presidential term, roughly 2029. As a result, the market is swiftly unwinding the previously embedded "legalization premium."

Technical Levels and Forward Path

From a chart perspective, the recent low of $1.48 (approximately €1.25–€1.30) is a critical technical support level. A sustained break below this point could open a path toward the 52-week lows near $0.77, intensifying the ongoing revaluation.

Operationally, focus shifts to the concrete timeline for the Schedule III rescheduling process, which involves the DEA and FDA and is expected to take several months. Furthermore, Canopy Growth is anticipated to provide an update on its "Canopy USA" strategy during its next quarterly conference call, detailing how it will adapt to the narrower regulatory scope. Until such clarity emerges, the stock is likely to experience continued high volatility as the market reprices it from a broad "legalization story" to a scenario more tightly focused on the medical sector.