Associated Press

Shares of Canopy Growth Corp sank after the company announced co-CEO Bruce Linton was stepping down Wednesday.

The leadership change came as a surprise, but many analysts say its ultimately a good thing.

Canopy is still positioned to lead growth in the $200 billion global cannabis industry, wrote Andrew Carter of Stifel.

Watch Canopy Growth trade live on Markets Insider.

The world's most valuable weed company still looks good to analysts, even after it canned its CEO.

Shares of Canopy Growth sank more than 6% Wednesday on the news that Bruce Linton, its co-founder and CEO, was leaving the company effective immediately.

Linton later said during an interview with CNBC that he was "terminated" from the top post at the company. After Canopy reported weak fourth-quarter earnings, its largest shareholder, Constellation Brands, vocally expressed disappointment, likely contributing to Linton's swift departure.

Even though the leadership change came as a shock, analysts say that the cannabis company is still poised to grow. Many have maintained outperform or buy ratings on shares, taking the weak earnings report and CEO change in stride.

"The magnitude of losses for WEED has expanded far more than we had expected, and while we commend Linton for his vision in establishing the world's leading cannabis company, we believe new leadership will be a welcome change," wrote a team of analysts at Cowen led by Vivien Azer in a note Wednesday.

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Others agreed with the board's decision to change leadership to better fit the company's vision for growth going forward. In August 2018, Constellation Brands — a large beer company— paid $4 billion for a 38% stake in Canopy. It marked the first major corporate investment in a marijuana cultivator. As part of the investment, Constellation was able to appoint four directors to Canopy's board, which now has a total of six following Linton's departure. Canopy also made Mike Lee, a veteran of Constellation, it's chief financial officer in May.

While Linton built the company that is "best positioned to lead growth in the $200 billion global cannabis category, it is clear the the Board sees a change in leadership as necessary to improve the execution to maintain that position," wrote a team of Stifel analysts led by Andrew Carter in a Wednesday note.

"We believe Canopy Growth represents the best investable opportunity for capitalizing on the growth of the global cannabis category," they said.

A main issue for cannabis companies is proving that they can become profitable soon, wrote Ryan Tomkins of Jefferies in a note Wednesday.

"In the case of Canopy, institutions indirectly invested through Constellation will also be demanding profitability," he wrote.

Competition in the space has ramped up, and has put more pressure on Canopy to be profitable — Aurora, a main competitor, said that it will soon be EBITDA-positive. Canopy, on the other hand, has said that it likely will not achieve profitability for the foreseeable future.

As for Linton, it remains to be seen what his next step will entail. Linton still holds 18 million shares — about 5% — of the company. In an interview with CNBC, he said that there is a big world out there besides Canada when asked if he would take another leadership role.

"Mr. Linton's value is clearly recognizing early stage value, and we could see Mr. Linton as an entrepreneur in another nascent opportunity," wrote Carter.

Shares of Canopy Growth are up 50% year to date.

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