Marijuana stocks were in motion Wednesday as Canopy Growth reported deeper fiscal Q4 losses as spending was unleashed ahead of Canada’s legalization of recreational cannabis.
Estimates: There are no analyst estimates available for EPS or revenue.
Results: Net loss of 54.4 million Canadian dollars, or 31 cents a share, widening from a year ago loss of 12 million, or 8 cents. Revenue jumped 56% to 22.8 million Canadian dollars, with kilograms sold up 45% to 2,528. Cash on hand soared 247% to 323 million. Net cash used in investment shot up to 93.2 million from 1.16 million a year ago.
“With the largest inventory and capacity today, Canopy Growth is uniquely positioned to go beyond our current commitments to provincial agencies and cannabis retailers in order to successfully open the regulated recreational cannabis market in Canada as a producer of choice nationwide,” said Chairman and CEO Bruce Linton in a statement.
President Mark Zekulin has also taken on the role of co-CEO but will continue to report to Linton.
Stock: Shares in Canopy Growth fell 1.5% to 30.50 in premarket trading on the stock market today. The stock had been selling off sharply after a steep run-up that began with its NYSE debut last month.
Among other marijuana stocks, Cronos Group was up 0.7% early. Marijuana-focused exchange-traded fund ETFMG Alternative Harvest and AdvisorShares Vice ETF, which also has exposure to cannabis, weren’t active yet.
Meanwhile lawn-care company Scotts Miracle-Gro, which has been bulking up its hydroponics business to take advantage of a potential boom in marijuana demand, was quiet. And alcohol company Constellation Brands, which has a stake in Canopy Growth, dipped 0.1% in premarket trading.
Marijuana Stocks: Growth Ahead
Cowen analyst Vivien Azer had rated Canopy Growth at outperform going into earnings.
“Fiscal 3Q18 represented another quarter of strong top line growth, coupled with notable investment spending, as (Canopy) continues to ready the business for the expansion of adult use in Canada, as well as international growth opportunities,” she said in a research note in February.
Marijuana stocks got a boost last week when Canada’s lawmakers approved legislation to fully legalize cannabis. Following the vote Cowen analyst Azer said the vote was the “catalyst that we’ve been waiting for.”
“It alleviates any residual concern in the market. With a $7 billion illicit market for cannabis in Canada, we believe the potential for dislocation of the black/gray market creates a robust category opportunity,” she said in a research note.
Azer also said there is “incremental revenue potential” for alcohol substitution as the market develops. This is especially the case if novel form factors, such as marijuana-laced gummies and chocolate, gain approval.
However, she pointed out the picture remains fuzzy outside of the North American country’s borders as the new legislation “puts Canada in violation of international law.”
“It remains to be seen if international markets will accept imports from Canada after the market opens up,” Azer said. “Regardless … there is a clear desire for Canada to maintain its first-mover advantage in global cannabis.”
