Canopy Growth Stock Momentum Fades as Regulatory Reality Sets In

The initial surge in cannabis stocks following a pivotal U.S. regulatory announcement has lost considerable steam. Canopy Growth shares, which skyrocketed approximately 54% in mid-December, are facing renewed selling pressure. As trading resumes this week, investor focus is shifting from hype to fundamentals: the stock's valuation in the wake of the rally, the persistent cash burn, and the practical timeline for regulatory implementation.

The stock's recent volatility is directly tied to developments in U.S. drug policy. On December 11, the share price spiked nearly 54% on initial reports suggesting a potential reclassification of cannabis. However, the signing of the "Increasing Medical Marijuana and Cannabidiol Research" Executive Order on December 18—which directs the Attorney General to expedite moving cannabis to Schedule III—marked a short-term peak.

Since that high, the stock has struggled to maintain its gains. A decline to $1.19 by last Friday erased a significant portion of the mid-December premium, despite trading volumes remaining elevated at over 17 million shares. This profit-taking activity reflects a market consensus that key hurdles remain:
* The formal rulemaking process to finalize Schedule III status is likely to take several more months.
* The associated tax relief, notably from Section 280E of the U.S. tax code, will not take effect until later.

Amid this regulatory narrative, the company announced an operational development. On December 15, Canopy confirmed a definitive agreement to acquire MTL Cannabis for roughly CAD 125 million. The deal is intended to be immediately accretive, bolster the medical cannabis business, and expand the company's footprint in Québec. So far, however, trading driven by regulatory headlines has overshadowed this fundamental strategic move.

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

Market Experts Adopt a More Cautious Stance

Countering the sector-wide enthusiasm, a recent report from The Motley Fool struck a note of caution. Despite the favorable industry tailwinds, Canopy Growth was omitted from the firm's current "best stocks to buy now" list. The analysis highlighted the ongoing cash outflow from operations and noted that while reclassification aids the tax burden, it does not resolve near-term operational challenges.

Historically, the stock has served as a highly volatile proxy for the broader cannabis sector. The current pullback fits a pattern where speculative capital quickly exits following major news events. Unlike the "Trump Rally" of mid-December, the central question now is whether the MTL acquisition and ongoing cost-reduction initiatives can bridge the gap to profitability before the anticipated tax relief materializes.

Key Levels and Forthcoming Catalysts

In the shortened year-end trading week, technical levels and scheduled events are coming into sharper focus:

• Critical Support Zones: The stock is approaching a key technical support area. A daily close below $1.15 could pave the way for a retest of the psychologically significant $1.00 level. Conversely, a move above $1.30 would be an initial signal of stabilization.
• Upcoming Milestones: Two significant events are anticipated by February 2026: the completion of the MTL Cannabis acquisition and the release of the company's third-quarter fiscal results (expected around February 6).
• Regulatory Timeline: Additional market catalysts may emerge from more detailed announcements by the DEA regarding the schedule for its rulemaking process.

The stage is set for the start of the new year. In the near term, price action and technical markers will be central. Over the medium term, the successful integration of MTL, operational trends revealed in the Q3 report, and tangible progress on Schedule III implementation will be decisive in determining whether the current weakness forms a sustainable base for recovery.