Quite a bit has modified since Canada legalized marijuana for leisure use in October 2018. Seven years again, a number of hashish shares, together with Cover Progress (TSX:WEED), had been buying and selling close to all-time highs. Buyers had been optimistic a couple of quickly increasing addressable market that may assist marijuana producers broaden manufacturing and profit from economies of scale.
Nonetheless, quickly after legalization, Cover Progress and its friends had been wrestling with a variety of points that included cannibalization from unlawful gross sales, rising competitors, excessive stock ranges, overvalued acquisitions, and mounting losses.
As we speak, Cover Progress inventory is valued at a market cap of $293 million and is down 99.8% from all-time highs.
Is Cover Progress inventory a superb purchase proper now?
Cover Progress’s fiscal 2025 outcomes reveal an organization in transition beneath new CEO Luc Mongeau, who has carried out aggressive restructuring measures to handle operational challenges. In fiscal 2025 (resulted in March), the marijuana producer posted an adjusted EBITDA (earnings earlier than curiosity, tax, depreciation, and amortization) lack of $23 million and missed its profitability targets. Nonetheless, the administration has recognized clear pathways to enchancment by way of value discount and operational focus.
Cover’s strategic realignment facilities on three key areas: unifying international medical hashish operations, streamlining Canadian adult-use enterprise towards high-margin segments, and centralizing operations.
Mongeau has already recognized $20 million in annual value financial savings, with over 50% executed, whereas eliminating a number of administration layers to speed up decision-making.
Cover emphasised that medical marijuana gross sales grew by 13% yr over yr, permitting the corporate to realize market share in a declining phase. Furthermore, the profitable launch of Claybourne infused pre-rolls, which achieved third-place rankings in some areas, validates a centered portfolio technique. Fill charges have improved dramatically from the mid-80s to the mid-90s vary, indicating higher provide chain coordination.
Nonetheless, important challenges persist for Cover Progress. As an illustration, Storz & Bickel’s income declined 23% in This autumn, resulting from broad vaporizer market softness that continued into fiscal 2026.
Worldwide operations additionally struggled with provide consistency points in Europe and elevated competitors in Australia. Most regarding is Cover USA’s deteriorating place, significantly Acreage’s liquidity challenges and the Ohio market’s underperformance, which diminished the mixed entity’s worth considerably.
What’s subsequent for WEED inventory?
Cover’s path to constructive adjusted EBITDA depends closely on the execution of the $20 million value discount program and income progress within the medical hashish phase.
Cover Progress inventory presents a traditional turnaround state of affairs with each upside potential and execution threat. The Canadian hashish large maintains sturdy model recognition in medical marijuana and advantages from an skilled administration crew implementing centered operational enhancements.
Alternatively, the funding case stays speculative given persistent losses, aggressive pressures, and regulatory uncertainties. The Cover USA state of affairs provides complexity and will require extra capital allocation to stabilize operations.
Whereas the $20 million value discount program supplies respiratory room, attaining sustainable profitability requires profitable execution throughout a number of enterprise traces concurrently.
Cover Progress ended fiscal 2025 with a money stability of $131 million. Over the following three years, its free money outflow may complete $180 million, which signifies the corporate should increase extra capital and dilute current shareholder wealth.
For risk-tolerant buyers believing in long-term hashish market progress, Cover Progress’s present valuation might provide a chance if administration efficiently executes its streamlined technique. Conservative buyers ought to await proof of operational enhancements and progress towards profitability earlier than contemplating funding.
