Canopy Growth Stock Falls on Fourth-Quarter Earnings

Canopy Growth drops

Canopy Growth Corporation (CGC)(WEED) reported its fourth-quarter results this morning before the market opened. When the market opened, the stock fell 3.9% to $29.7 from its previous day’s close of $30.95 in the US market while it opened 1% lower in the Canadian market. The stock was trading about 2.2% lower in both the US and Canadian markets at 11:30 AM ET.

Canopy Growth Stock Falls on Fourth-Quarter Earnings

Highlights

The company’s active registered patients grew 35% year-over-year and 7% sequentially. It sold 2,528 kilograms and kilogram equivalent of product, which reflected 45% growth year-over-year and 8% growth sequentially. The company’s selling price per gram also increased about 5% year-over-year to 8.43 Canadian dollars. The company reported 22.8 million Canadian dollars in sales, up 56% year-over-year. Sequentially, the company’s sales grew just ~5%.

The company’s margins contracted to 37% of sales after the fair value accounting for inventory and biological assets. Without these measures, the gross margin stood at 52% in the fourth quarter, contracting from 62% in the corresponding quarter a year ago. According to the company, its margins contracted as a result of costs related to subsidiaries not yet cultivating. The company added that, excluding these costs, its margins would have stood at 66% of sales.

The company’s operating expenses for sales and marketing grew to 65%, compared to 28% a year ago, while general and administration expenses grew to 74% of sales.

Given these results, the company reported EBITDA of -22.9 million Canadian dollars, compared to -0.1 million Canadian dollars a year ago, and a net loss per share of 0.4 Canadian dollars.

The company also held 322.6 million Canadian dollars in cash on its balance sheet to fund its obligations. The cash balance increased from 101 million Canadian dollars over the year.

Outlook

Legal recreational cannabis sales in Canada are slated to begin on October 17, and Canopy Growth stated that it’s in a position to supply “large quantities of cannabis,” which should increase its sales beginning in the second quarter of 2019. This news comes on the back of the company’s effort to increase capacity over last year, similar to the expansion efforts at Aurora Cannabis (ACB)(ACBFF), MedReleaf (MEDFF), and others in the space (HMMJ).

We’ll follow up with more detailed analysis of Canopy Growth’s earnings—so stayed tuned to Market Realist.