Canopy Growth has a new CEO and analysts are saying he faces some big challenges.

Pot stocks were falling on Tuesday as analysts remarked on the new chief executive.

Constellation Brands’ Chief Financial Officer David Klein will become the new Canopy CEO in January.

This is exciting as Constellation is Canopy’s biggest shareholder. Klein will be replacing Mark Zekulin on January 14th.

According to MKM analyst Bill Kirk, Klein should bring needed fiscal discipline to the company. “We have harped on some of Canopy’s spending items that seem excessive: 1) equity comp greater than revenue; 2) G&A greater than revenue; and 3) inventory levels which likely don’t match the demand curve,” Kirk wrote in a note to clients.

Kirk says that while he expects Klein will move to address those excesses, “the mechanisms to address these issues are: 1) lower head count; 2) lower salaries; 3) lower discretionary pay; and/or 4) inventory destruction. None of these paths, while necessary, are good for morale.”

“This is an unachievable setup for any consumer products company. Mr. Klein brings a much needed fiscal responsibility lens, but the cures are difficult,” said Kirk.

MKM has a “neutral” rating on Canopy with a fair value estimate of C$23.

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