Could Canopy Growth Stock Deliver a 4X Gain? 1 Analyst Thinks So.

Canopy Growth (NASDAQ: CGC) may have surged during the spring's rescheduling rally for marijuana stocks, but since then, this popular cannabis legalization play has coughed back these gains, falling back below $1 per share as I write this.

Nevertheless, one sell-side analyst remains very bullish on the company's prospects. But I'm not convinced. While the analyst provides substance to back his bull case, his argument doesn't quite explain how Canopy can deliver triple-digit percentage gains from here.

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Canopy Growth and the aggressive price target

Currently, the average analyst price target for Canopy Growth is $1.22 per share, about 27% above its U.S. share price as I write this. An outlier of a price target paints a completely different picture of Canopy Growth and its prospects. In a June 16 research note, Roth Capital Partners' Bill Kirk reiterated his buy rating and per-share price target of 5 Canadian dollars on Canopy Growth.

That's about four times the current price of Canopy's shares listed on the Toronto Stock Exchange (TSX). In his update, the analyst noted that, if not for one-time expenses, Canopy Growth would have "produced a record adjusted EBITDA" (earnings before interest, taxes, depreciation, and amortization) during its recently completed fiscal fourth quarter. Kirk also cited improved market share, further cost-reduction efforts, and other positives, such as the prospect of reduced future shareholder dilution.

Take this outlier forecast with a grain of salt

Kirk may lay out a strong argument, but it's difficult to see how his forecast will translate into a 4x surge for Canopy shares. His FY2027 estimates call for modest revenue growth of around 5.1% and for adjusted EBITDA to remain negative, though near breakeven. Meeting or beating this may be enough to send the stock modestly higher, to the aforementioned median price target, but not fourfold.

Perhaps Kirk's forecast anticipates faster-than-expected progress in U.S. federal marijuana legalization efforts. Still, there are other marijuana stocks with stronger fundamentals and legalization catalysts, such as already profitable U.S.-based cannabis companies licensed at the state level. If you're bullish on the trend, consider these names instead, and take Kirk's optimistic forecast on Canopy Growth with a grain of salt.