Will Canopy Growth Still Be Able to Achieve One Billion in Sales?

Canopy Growth’s weak performance

Perhaps, Canopy Growth (WEED)(CGC) selling less product in Q4 compared to Q3 was one of the key performance metrics that spooked the market after the company reported its earnings release. After all, with a stage set for higher sales to the Canadian market, the last thing markets expected was a decline in sales in the fourth quarter, which fell short in both recreational and medical markets.

What about international?

While Canopy Growth experienced a slowdown in recreational and medical cannabis kilograms in the domestic or Canadian market, the company’s international medical cannabis kilograms also experienced a slowdown. The kilograms and kilograms equivalent in the international market dropped by nearly 36% to 130 kilograms and kilogram equivalents in the fourth quarter from 240 kilograms and kilogram equivalents in the previous quarter.

The resistance in the international market is evident in this slowdown. The company’s co-founder, chair and Co-CEO, Bruce Linton, said that cannabis products are prescribed as a last resort and are available at a high price.

Looking forward

In its earnings release back in January, Constellation Brands (STZ) stated that Canopy Growth would reach one billion Canadian dollars in sales in the next 18 months. The decline in Canopy Growth’s kilograms sold in Q4 compared to Q3 makes us cautious about the future of the recreational cannabis sales in Canada. After all, how will a company that delivered a total sales of 226 million Canadian dollars in fiscal 2019 and experienced a slowdown in recreational cannabis sale grow its revenue to one billion Canadian dollars?

This was one of the questions posed to the  Canopy Growth’s management during the Q4 earnings call by Christopher Michael Carey of BofA Merrill Lynch. In response, the company’s co-founder, chairman & co-CEO, Bruce Linton, said that the target is “achievable.” Linton added that the Canadian market will be the largest driver of revenue growth for the company over the next three quarters.