Canadian cannabis stocks are struggling to grow revenue and earn profits. That has taken a toll on their stock prices. However, not all of them qualify as bad investments.

Investor’s all-time favorite Canadian pot grower Canopy Growth (CGC 2.08%) has returned close to 300% when the cannabis market was in a boom between 2017 and 2018. It has been in pursuit of positive EBITDA for quite a while now. Despite doing everything right, the pot grower is tackling some headwinds to reach its goal. But all hope is not lost for Canopy. If it continues down this track, chances are it could revive sooner than later. Here’s I believe how.

A slight bump on the path to success

Canopy’s fourth quarter and fiscal year 2022 results did not please investors. Fiscal 2022 net revenue declined 9% to $520 million Canadian dollars from fiscal 2021.

Canadian recreational business fell 10% while medical cannabis business dipped 5% year over year. Management stated in the earnings call that transitioning its product mix to focus on premium products caused this dip in revenue. 

Industry-wide pricing pressure also brought down its gross margin for the year that came in a negative 37%. As a result, adjusted EBITDA loss came in at CA$415 million, versus CA$340 million in the prior year.

Peer Aurora Cannabis’s concerns were similar for its disheartening performance in its recent quarter. Unlike Aurora, Canopy didn’t set any specified timeline but assured that its priority now is to improve its Canadian business and achieve profitability at the earliest.

On the right track

I have always admired Canopy Growth's strategies. While peer Aurora went on an acquisition spree and burdened its balance sheet, Canopy played it smart. It secured a strong partner when it could to do its financial heavy lifting. U.S. beverage giant Constellation Brands (STZ -0.29%) invested CA$245 million in Canopy in 2017. It has also increased its stake to 38.6% in Canopy now by exercising its warrants. 

This financial backing let Canopy end the quarter with cash and cash equivalents of CA$776 million and short-term investments of CA$595.7 million. 

Cash on hand has also allowed Canopy to outperform its peers by introducing new recreational products in the market. Before its Q4 results, it launched an array of recreational offerings under its 7ACRES, Ace Valley, Deep Space, and Doja brands. These products include cannabis flowers, tetrahydrocannabinol (THC)-infused beverages, pre-roll joints, and some new offerings for craft cannabis connoisseurs. Canopy also continues to reduce its selling, general and administrative expenses that fell 18% to CA$472 million compared to fiscal 2021. 

History could repeat itself

I see Canopy’s struggles as a slight bump on its path to reaching its goal. It is doing everything right -- cutting costs, safeguarding its balance sheet, launching new innovative products, and strengthening its U.S. exposure by securing strong partners along with an international market presence. Besides Constellation, it has pending partnership deals with Acreage Holdings, Wana Brands, and Jetty Extracts -- that will be final whenever U.S. federal legalization comes to fruition.

External headwinds in the Canadian market are weighing in on Canopy now. It could take a while but if it continues down its (strategically planned) path, this pot grower could rebound to be the stronger company it once was. But investors will have to be patient.

If you’re an investor who likes to buy and hold, this growth stock could be a good option. Street analysts see a potential upside of 84% for Canopy’s stock in the next 12 months, which I believe is possible.

Federal legalization (if and when it happens) would help Canopy establish a strong U.S. market presence, driving the stock sky-high. So why not take advantage of the dip (trading at its 52-week low) now.