Canopy Growth shares tumble on CEO exit plans, loss of market share

Canopy Growth Investors Pull Back As Losses Widen In Q1 CBD Products Coming To US Market

Canopy Growth Investors Pull Back As Losses Widen In Q1 CBD Products Coming To US Market

Canada's largest cannabis company reported a surprise quarterly loss of almost $1 billion according to its reporting of its first-quarter earnings for the fiscal year ended June 30.

The loss translated to C$3.70 per share coming from previous C$40 per share. As of press time, Canopy shares were still down 13.8 percent and was at its lowest since January.

However, Kessner notes that Canopy posted no organic worldwide sales growth and domestic sales declined "despite a substantial uptick (we estimate +55%) for the broader Canadian recreational cannabis market during the quarter".

As reported by MarketWatch, the world's largest cannabis company by market value put the loss down to the elimination of C$1.18 billion in warrants related to Constellation's investment. The stock has a market cap of $11.39 billion, a P/E ratio of -18.24 and a beta of 3.63.

The adjusted EBITDA in Q1 2020 accounted for a loss of $92.0 million, as the company said it reflected continuing losses in core operations in Canada and Europe. The company harvested 40,960 kilograms of dried cannabis, an increase of 183 percent over the fourth quarter a year ago.

"Our recent harvests are proof that our focus on operational excellence is working, and we look forward to showing both our Canadian and USA customers what we've been working on behind the scenes to prepare for the next wave of products coming later this year", Canopy CEO Mark Zekulin said. Revenue from worldwide medical cannabis sales climbed 209 per cent year-over-year. It also filed 56 patent applications, increasing its portfolio to 111 patents and 270 patent applications.

Increase in research and development expense in Q1 2020 over Q1 2019 was due to Canopy Growth's investment in new research and development efforts. This could suggest that Canopy is leading the fight in the cannabis supply shortage in the country. Constellation took a 38% stake in Canopy in October 2018.

The shortage had not been addressed at present with analysts saying that the pot companies should focus on increasing their harvest first instead of formulating new products.

As mentioned, Canopy also had impressive product inventory amounting to C$394 million, including C$93 million of finalized brands.

Cannabis company Canopy Growth plunged 14% in early trading Thursday after missing its lowest revenue estimate for its fiscal first-quarter.

Indeed, analysts' belief in Canopy remains to be unwavering. Most notably, it appears that Canopy lost its first-place share of the Canadian market to Aurora Cannabis. Bank of America set a $53.00 target price on Canopy Growth and gave the company a "buy" rating in a research report on Wednesday, July 3rd. One investment analyst has rated the stock with a sell rating, eight have given a hold rating and ten have issued a buy rating to the company's stock.

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