Valued at a market cap of $623 million, Cover Progress (TSX:WEED) is among the many largest hashish firms on the earth.
The marijuana inventory has grossly underperformed the broader markets since Canada legalized hashish for leisure use in October 2018. At present, WEED inventory is down 99% from all-time highs because it has wrestled with a number of headwinds lately.
Cover Progress and its friends have grappled with oversupply of hashish merchandise, excessive stock ranges, overvalued acquisitions, low revenue margins, rising competitors, and cannibalization from the unlawful market.
Let’s see why Cover Progress inventory stays a high-risk funding in January 2026.
Is Cover Progress inventory purchase proper now?
Cover Progress posted its strongest quarterly efficiency lately within the second quarter of fiscal 2026 (led to September), however important challenges stay, making the hashish firm a dangerous guess for traders.
The corporate reported a $3 million adjusted EBITDA (earnings earlier than curiosity, tax, depreciation, and amortization) loss, an enchancment from the $6 million loss a 12 months earlier, but profitability stays elusive regardless of aggressive cost-cutting measures.
Income efficiency throughout Cover’s enterprise segments tells a blended story.
- Canadian adult-use hashish gross sales surged 30% 12 months over 12 months to drive second-quarter development, fueled by demand for Claybourne infused pre-rolls and new All-In-One vape merchandise from Tweed and 7ACRES.
- The Canadian medical hashish division grew 17% as insured affected person registrations climbed 20% yearly.
- These vibrant spots had been offset by a 39% decline in worldwide hashish gross sales.
CEO Luc Mongeau expressed disappointment with its efficiency in Europe, pushed by provide constraints and inside course of failures.
Flowers sourced from Portugal failed to satisfy high quality requirements, whereas logistical gaps prevented Canadian GMP (good manufacturing apply) services from delivering product to Germany.
A more healthy steadiness sheet
Administration has applied every day oversight to stabilize operations, however expects European income to stay at depressed second-quarter ranges by the rest of fiscal 2026.
Cover achieved $21 million in annualized price financial savings, exceeding its $20 million goal forward of schedule. It additionally pay as you go $50 million on its senior secured time period mortgage, which ought to decrease annual curiosity bills by $6.5 million.
With near $300 million in money and no important debt maturities till September 2027, the steadiness sheet is more healthy in comparison with 2024.
Notably, administration eradicated the going-concern warning that had beforehand solid doubt on the corporate’s survival.
Pink flags
But a number of crimson flags persist.
- Hashish gross margins declined 12 months over 12 months to 31% regardless of sequential enchancment from the primary quarter’s 24%.
- The corporate burned by $19 million in free money circulate throughout the quarter and is forecast to finish fiscal 2026 with a free money outflow of $50 million.
- Proposed Canadian authorities adjustments to medical hashish reimbursement for veterans threaten a key income stream, although administration continues to evaluate the potential affect.
Cover’s Storz & Bickel vaporizer section grew 5% sequentially with the VEAZY launch however faces headwinds from financial uncertainty and tariff pressures.
Till the corporate demonstrates sustained constructive adjusted EBITDA and resolves its execution issues in Europe, the funding carries substantial threat.
What’s the WEED inventory worth goal?
Analysts monitoring Cover Progress inventory forecast it would stay unprofitable within the close to time period. Regardless of a concentrate on cost-savings initiatives, Cover Progress inventory is predicted to report a cumulative free money outflow of over $100 million by fiscal 2028.
Regardless of these company-specific points, Bay Road stays bullish on Cover Progress inventory and forecasts a 100% surge from present ranges, primarily based on consensus worth targets.
