Why Canopy Growth Is Down 6.5% ahead of Its Q2 Earnings

Canopy Growth (WEED) (CGC) will report its fiscal 2020 first-quarter earnings results today after the market closes. Analysts expect it to report revenue of 122.5 million Canadian dollars and a net loss of 222.9 million Canadian dollars. For more on analysts’ expectations, read Canopy Growth: What to Expect from Its Earnings Today.

Canopy Growth’s stock performance

Today, Canopy Growth was down 6.5% as of 12:31 PM ET. Yesterday, Tilray (TLRY) reported its second-quarter earnings results. The company outperformed analysts’ revenue expectations, but its net losses were wider than expected. Earlier this month, Cronos Group reported impressive sales growth in its second quarter. However, its operating losses increased YoY. It appears investors are anxious that Canopy Growth will follow Tilray’s example and report higher losses.

Aphria outperformed both analysts’ revenue and EPS expectations in the comparable quarter. We’re curious to see what path Canopy Growth will follow.

Today, the spread between the yields of the ten-year and two-year Treasury notes reversed. The two-year Treasury note had a higher yield than the ten-year Treasury note. This phenomenon is known as an inverted yield curve, and analysts see it as an indicator of a recession. The broader market is down today. The S&P 500 Index is down 2.3%, and the Nasdaq is down 2.8%.

In the cannabis space, the ETFMG Alternative Harvest ETF and the Horizons Marijuana Life Sciences Index ETF are down 5.7% and 1.1%, respectively. Canopy’s peers Aphria (APHA), Aurora Cannabis (ACB), and HEXO (HEXO) are down 6.9%, 7.7%, and 5.8%, respectively.

Year-to-date performance

This year, Canopy Growth has outperformed the broader equity market. The company’s stock is up 27.2% YTD, and the S&P 500 Index is up 16.7%. Canopy’s peers Aphria, Aurora Cannabis, and HEXO are up 16.4%, 30.1%, and 38.2% YTD, respectively.

What to watch

Along with its first-quarter performance, we’re interested in knowing about Canopy’s short- and long-term strategies. We also expect it to give an update on its leadership changes following the exit of its founder, Bruce Linton. Yesterday, Canopy Growth announced that it had signed an agreement to acquire Beckley Canopy Therapeutics, but it didn’t disclose any financial details. Beckley is a cannabinoid-based medical research company.

To learn more about the cannabis industry, be sure to read Investing in the Cannabis Industry.

Update: Check out our analysis of the results in Canopy Growth Stock Tanks after Q1 Earnings.