Canadian pot producer Canopy Growth (CGC) on Thursday evening reported fiscal third-quarter earnings and sales that missed some estimates. Canopy Growth stock fell earlier in the day, along with most marijuana stocks, but is working on a buy point.
Canopy Growth Earnings
Estimates: Zacks forecast a 15-cent per-share loss — or 20 cents when converted to Canadian dollars — deeper than the loss from a year ago. Sales were seen nearly quadrupling to $66 million, or around 88 million Canadian dollars.
FactSet estimated an 11-cent per-share loss and revenue of 81.1 million Canadian dollars, according to MarketWatch.
Results: A net loss of 38 Canadian cents a share, according to disclosure filed late Thursday. Net sales came in at 83.1 million Canadian dollars.
Canopy Growth Stock, Marijuana Stocks
Canopy Growth stock closed 0.1% higher to 46.72 in the stock market today. As with some other marijuana stocks, Canopy Growth stock has consolidated for the couple of weeks after running up from Christmas to early February. Shares are in a very deep cup base — 57% — with a handle buy point of 51.99. Breakouts from bases deeper than 40% are less likely to work.
Canopy Growth stock has a middling IBD Composite Rating of 62, due to its lack of profits.
Among the other Canadian marijuana stocks that trade on U.S. exchanges, Cronos Group (CRON) finished up 1.8%. Cronos Group stock is off highs reached this month following an analyst downgrade. Tilray (TLRY) lost 0.9%. Aphria (APHA) fell 2.1%.
Canopy Growth, Aurora Cannabis: Half Of Canada’s Recreational Market?
Canaccord Genuity analyst Matt Bottomley, in a research note last week, estimated that Canopy Growth controlled the biggest swath of Canada’s recreational market, based on product orders from Canada’s provinces and the company’s retail presence. Legal sales of recreational marijuana began in Canada on Oct. 17.
He said the company’s recreational sales could represent more than 30% of Canada’s recreational market. Aurora Cannabis, when it reported on Monday, said it grabbed around 20% of recreational sales in Canada.
Cowen analyst Vivien Azer said last week that Canopy Growth controlled much of the market for cannabis capsules. Those soft-gel capsules tend to command a higher price than dry buds. But she cut her sales forecast for the company, as shortages trip up Canada’s recreational pot business.
Canopy also has a license to produce hemp in New York state. The 2018 Farm Bill legalized hemp, a source of CBD, or cannabidiol.
Constellation Brands Investment In Canopy Growth
Canopy Growth also arrives on Canada’s recreational market armed with a $4 billion investment from Corona parent Constellation Brands (STZ).
Analysts, however, have raised questions about Constellation’s investment, amid the volatility in marijuana stocks. Constellation Brands last month said it remained confident in Canopy’s ability to deliver on its sales goals. But Constellation also said that when it offered its outlook for fiscal 2020 in April, it would break out a separate forecast illustrating how its investment in Canopy would affect profits.
Doing so, management said, would draw more attention to its core alcohol business’ ability to boost financial results and generate cash. Those characteristics, the company said, were “not currently reflected in our valuation.”
Constellation Brands stock fell 0.5%.
Aurora Cannabis Earnings
Aurora Cannabis on Monday reported sales came in at the top end of an earlier company forecast. However, losses deepened. Lower weed prices, a medical-marijuana excise tax, packaging costs and requirements, and costs related to ramping up its highly automated Aurora Sky grow facility all hit margins.
During the Aurora Cannabis earnings call, Chief Corporate Officer Cam Battley said the company decided to absorb the costs of the 10% excise tax despite the drag on sales. CEO Terry Booth said that as recreational sales got off the ground, some of the company’s packaging machines weren’t fully set up.
As the 2018 Farm Bill in the U.S. tempts more companies to rush into the hemp and the CBD market, Aurora took a more cautious tone. Booth said the legislation didn’t clearly address CBD distribution. He said the company would enter the U.S. hemp market “when it’s proper and when it’s legal.”
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