Canopy Growth (CGC) and the Trump Cannabis Rescheduling: A Market Catalyst for Long-Term Recovery?

The potential rescheduling of cannabis under the Trump administration represents a seismic shift in U.S. drug policy, with profound implications for the cannabis sector. By reclassifying cannabis from Schedule I to Schedule III under the Controlled Substances Act (CSA), the administration aims to align it with substances like anabolic steroids and ketamine, unlocking medical research opportunities and easing regulatory burdens. While this move does not legalize cannabis, it could catalyze a valuation re-rating for companies like Canopy Growth (CGC), particularly if the policy facilitates access to federal banking, tax relief, and clinical validation.

Strategic Positioning and Financial Resilience

Canopy Growth, a Canadian cannabis leader with a global footprint, has shown signs of operational and financial stabilization in Q3 2025. The company reported net revenue of $74.8 million, a 5% decline year-over-year but an 8% increase when excluding divested businesses. Key drivers include a 16% growth in Canadian medical cannabis sales, driven by larger average order sizes, and a 14% rise in international markets, buoyed by strong performance in Poland and Germany. The Storz & Bickel division, which produces vaporization devices, saw a 19% revenue surge, reflecting growing consumer demand for premium cannabis products.

Adjusted EBITDA improved by 61% year-over-year, and total debt fell to $442 million, signaling improved liquidity and reduced financial pressure. These metrics suggest Canopy Growth is emerging from a period of restructuring, positioning it to capitalize on policy-driven tailwinds.

Policy-Driven Valuation Re-Rating

The rescheduling of cannabis to Schedule III could directly enhance Canopy's value proposition. First, it would enable FDA-approved clinical trials for its products, validating medical claims and differentiating its offerings in a competitive market. Second, the policy could reduce tax penalties under Section 280C of the IRS code, allowing cannabis companies to deduct ordinary business expenses-a critical factor for improving profitability. Third, eased federal restrictions may spur investment in research and development, particularly in therapeutic applications, where Canopy has already invested in partnerships with academic institutions as reported.

Market reactions underscore this potential. Following reports of Trump's rescheduling plans, Canopy's stock surged alongside peers like Tilray Brands, reflecting investor optimism about a sector-wide re-rating. However, the company's recent $416 million net loss in FY2024 highlights the need for sustained operational improvements to translate policy optimism into long-term profitability.

Risks and Political Realities

While the rescheduling proposal is a significant catalyst, its success hinges on DEA and HHS approvals, which remain subject to internal debate and political dynamics. Additionally, full cannabis legalization would require Congressional action-a higher hurdle than rescheduling. For Canopy, challenges persist in its U.S. CBD exit and declining Australian medical sales, which could offset gains from U.S. federal policy shifts.

Conclusion: A High-Conviction Bet?

The Trump administration's cannabis rescheduling policy represents a strategic inflection point for the sector. For Canopy Growth, the alignment of improved financial metrics with potential regulatory tailwinds creates a compelling case for long-term recovery. However, investors must balance the promise of policy-driven growth with the company's historical volatility and operational risks. If Canopy can leverage rescheduling to accelerate R&D, expand into medical markets, and reduce debt, it may emerge as a key beneficiary of this policy shift.

As the DEA's review unfolds, the market will likely continue to price in the probability of rescheduling-a development that could redefine the cannabis industry's trajectory and unlock new value for forward-thinking investors.