While both companies offer significant upside potential, they remain unprofitable and could go bankrupt if they fail to achieve significant growth over the next five years.
Is this TSX stock a high-risk investment?
Canopy Growth stock, valued at a market cap of $592 million, rose from $16.50 in August 2015 to $650 in October 2018. Today it trades at $1.73 per share. Canopy Growth’s second-quarter results show a company making progress on turnaround efforts, but several factors make it a high-risk investment.
In the second fiscal quarter (ended in September), Canopy grew its adult-use cannabis revenue in Canada by 30% year over year. In addition, medical cannabis sales increased by 17%, while insured patient registrations increased by 20%.
Canopy also exceeded cost savings targets, realizing $21 million in annualized savings, and narrowed its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) loss to $3 million from $6 million last year.
However, sales from Europe fell 39% due to supply chain disruptions and quality control issues. Flowers sourced from Portugal did not meet standards and internal process gaps prevented delivery from Canadian facilities to Germany.
With a negative EBITDA margin and free cash outflow of $19 million in the second quarter, Canopy continues to burn cash. Analysts also predict that cumulative free cash outflows through fiscal 2028 will exceed $125 million.
With $300 million in cash and $226 million in long-term debt, Canopy Growth will need to raise additional capital to cover interest expense and cash burn.
Proposed changes by the Canadian government to medical cannabis reimbursement for veterans could negatively impact the high-margin medical segment that is driving growth.
The cannabis industry itself remains highly volatile due to price pressure, especially in vape products, where competitors have engaged in aggressive price cutting.
Canopy faces continued challenges from U.S. tariffs, which are putting pressure on its Storz & Bickel vaporizer business, and broader economic uncertainty impacting consumer confidence. These multiple risk factors make Canopy only suitable for investors who are comfortable with significant volatility and potential capital loss.
The bear case for investing in Plug Power stock
Plug Power is another loss-making company that will remain a speculative investment in 2026. In the third quarter of 2025, it reported revenues of $177 million, with its electrolyzer business growing 46% to $65 million.
Plug Power improved cash burn by 50% to $90 million. It also announced plans to monetize electricity rights and release limited cash, expected to generate more than $275 million in liquidity through a partnership with a data center developer.
Alternatively, Plug Power is expected to report free cash outflows of more than $650 million through 2027. The company should still be profitable after almost thirty years. Management reiterated targets for gross margin neutrality by year-end and positive adjusted EBITDA in the second half of 2026.
While the recent $350 million capital raise and planned asset monetization will help reduce debt, Plug has relied on continued capital increases to stay afloat. This continued dilution hurts existing shareholders and raises questions about the sustainability of the business model.
There are many execution risks in the electrolyzer sector, where Plug maintains an $8 billion pipeline. These large-scale hydrogen projects are often delayed, with customers taking years to reach final investment decisions. One quarterly loss on large projects can significantly impact financial results, making revenue forecasts unreliable.
The company faces stiff competition from well-capitalized rivals in the emerging hydrogen market. Technology risk remains high as the industry works to prove commercial viability at scale. Regulatory uncertainty around hydrogen subsidies and clean energy policies could dramatically change the competitive landscape.
While incoming CEO Jose Luis Crespo has deep business experience, any strategic shifts during the transition could impact execution. With negative cash flow, mounting debt and an unproven path to profitability, Plug Power represents a risky bet on the future of the hydrogen economy.
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