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Strength Seen in Canopy Growth (CGC): Can Its 11.0% Jump Turn into More Strength?

Canopy Growth Corporation (CGC) shares ended the last trading session 11% higher at $11. The jump came on an impressive volume with a higher-than-average number of shares changing hands in the session. This compares to the stock's 52.7% gain over the past four weeks.

The surge in Canopy Growth's shares can be attributed to the U.S. Government's proposal to reclassify marijuana from Schedule I (reserved for drugs with a high potential for abuse) to Schedule III (reserved for drugs with a moderate to low potential for physical and psychological dependence) under the Controlled Substances Act. The reclassification will likely lead to higher sales of marijuana-related products thereby boosting Canopy Growth's potential.

This company is expected to post quarterly loss of $0.33 per share in its upcoming report, which represents a year-over-year change of +85.7%. Revenues are expected to be $52.71 million, down 18.6% from the year-ago quarter.

Earnings and revenue growth expectations certainly give a good sense of the potential strength in a stock, but empirical research shows that trends in earnings estimate revisions are strongly correlated with near-term stock price movements.

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For Canopy Growth, the consensus EPS estimate for the quarter has been revised 58.9% higher over the last 30 days to the current level. And a positive trend in earnings estimate revision usually translates into price appreciation. So, make sure to keep an eye on CGC going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

Canopy Growth is part of the Zacks Medical - Products industry. Aurora Cannabis Inc. (ACB), another stock in the same industry, closed the last trading session 6.9% higher at $7.61. ACB has returned 23% in the past month.

Aurora Cannabis' consensus EPS estimate for the upcoming report has remained unchanged over the past month at -$0.18. Compared to the company's year-ago EPS, this represents a change of +88%. Aurora Cannabis currently boasts a Zacks Rank of #3 (Hold).

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