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Why Canopy Growth Reported Losses in Q3

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Lower pricing

During the earnings call, Canopy Growth (WEED) stated that it experienced lower medical sales in terms of kilogram equivalents due to shifting resources towards the recreational cannabis segment. Overall, the company’s weighted average sales price declined 12% year-over-year to 7.3 Canadian dollars due to wholesale sales to provincial crown corporations in Canada.

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Expenses

During the third-quarter earnings, Canopy Growth reported a net loss of 237 million Canadian dollars—compared to net gains of 105 million Canadian dollars in the previous quarter. Expansion and ramping up the production for recreational cannabis led to the recognition of expenses during the quarter. The costs increased due to investments in branding and packaging for recreational cannabis as well as the development of new products and education programs. The company stated that these investments will help increase the market share.

However, Canopy Growth managed to report an income of 0.22 Canadian dollars per share, which increased from 0.01 Canadian dollars in the third quarter of 2017. The increase was mainly due to the positive impact of a non-operating income of ~235 million Canadian dollars. The gain came from a change in fair values of financial assets, especially warrants of TerraAscend and Slang companies.

Canopy Growth has also outperformed its peers (HMMJ). Aphria (APHA) rose 61.5% YTD (year-to-date), while Aurora Cannabis (ACB) rose 37.2%. However, Cronos Group (CRON) tops these companies with a gain of 100% YTD.

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