Cannabis: Will Top Companies’ Earnings Be a Relief?


Nov. 20 2020, Updated 11:54 a.m. ET

The cannabis earnings season has started again. Earnings season is an exciting time for investors who have been eyeing the sector. The top cannabis companies including Aurora Cannabis (ACB), Canopy Growth (CGC) (WEED), and Cronos Group (CRON) disappointed investors in the last quarter. So, what has changed in the recent quarter? Can investors expect a positive turnaround for the top cannabis players? Let’s look at what analysts and the companies expect for upcoming earnings in November.

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Earnings season for cannabis companies

Last month, HEXO’s (HEXO) earnings were disappointing. The company announced that it would report lower revenues for the fourth quarter before the release. HEXO also withdrew its fiscal 2020 outlook. For the fourth quarter, the company reported net revenues of 15.4 million Canadian dollars in the fourth quarter—higher than the fourth quarter of 2018 but lower than its revenue guidance. The company also reported a loss of 18 Canadian dollars per share. Read HEXO Q4 Earnings: Good or Bad News? to learn more.

Aphria (APHA) reported impressive earnings for the first quarter of fiscal 2020 on October 15. The company’s revenues of 126.1 Canadian dollars were higher YoY (year-over-year). However, the revenues missed analysts’ estimates of 132.2 million Canadian dollars. Aphria also reported a positive EBITDA of 1.0 million Canadian dollars. Analysts expected the company to report a negative EBITDA of 2.2 million Canadian dollars. The EPS was around 0.07 Canadian dollars—higher than analysts’ estimates of a loss of 0.02 Canadian dollars. This week, Jefferies analysts gave the stock a “buy” rating with a target price of 11 Canadian dollars. To know more, read Aphria: Why Jefferies Recommends a ‘Buy.’

HEXO’s preliminary results and analysts’ price cut impacted the cannabis sector. Analysts and investors doubt whether other cannabis companies can perform better. So far, 2019 hasn’t been favorable for the sector.

Aurora Cannabis and Canopy Growth carry high expectations. They’re the top two players in the cannabis space. Their results come at a time when pessimism is in the air. What are the expectations?

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Canopy Growth’s upcoming earnings

Canopy Growth will report its results for the second quarter of fiscal 2020 on November 14. Analysts expect the company to report revenues of 113 million Canadian dollars in the second quarter—an increase of 384.3% YoY. For fiscal 2020, the company could report revenues of 562.6 million Canadian dollars—a rise of 148.5%. However, the estimate is a huge step down from analysts’ previous expectations. In July, analysts expected the company to hit 1 billion sales in fiscal 2020. Read Canopy Growth: Is $1 Billion in Sales Still Possible? to learn more. However, Canopy Growth is confident that it will hit the target.

Canopy Growth could report an adjusted negative EBITDA of 89.0 million Canadian dollars in the second quarter of fiscal 2020. For the fiscal year, the company could report a negative EBITDA of 318.3 million Canadian dollars. To learn more read, Canopy Growth’s Q2 Earnings: What to Expect.

What to expect from Aurora Cannabis

Aurora Cannabis will report its earnings for the first quarter of fiscal 2020 in November. Analysts expect Aurora Cannabis to report revenues of 98.0 million Canadian dollars—an increase of 230% YoY.

The company’s production facilities and growth in its medical business could drive its revenues this quarter. However, Aurora Cannabis’s rising debt compared to its peers is a concern for investors. The company’s gross margin could improve to 56.0% from 55.7% in the fourth quarter. However, the company could report a negative EBITDA of 17.4 million Canadian dollars. To learn more, read Aurora Cannabis: What to Expect from Its Q1 Earnings.

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Cronos Group’s upcoming third-quarter earnings 

Cronos Group will report its third-quarter earnings results on November 12. Analysts expect the company to report revenues of 13.9 million Canadian dollars—an increase of 275.6% YoY. The company could report a lower gross margin of 50% compared to 55.1% in the third quarter of 2018. Cronos Group could report a negative EBITDA of 19 million Canadian dollars—higher than the negative EBITDA of 4 million Canadian dollars in the third quarter of 2018.

Cannabis companies’ stock performance 

October wasn’t a good month for cannabis players. Aurora Cannabis stock fell 18.2%, while Canopy Growth stock fell 12.9%. Meanwhile, Aphria stock fell 3.6%, while Cronos Group stock fell 9.2%. HEXO stock fell the most by 45.7%, respectively.

Aurora Cannabis, Canopy Growth, and Cronos Group have all expanded and developed products for the edibles market. However, the revenues from edibles can’t be expected until later next year.

Will Aurora Cannabis, Canopy Growth, and Cronos Group’s earnings be a turnaround factor for the cannabis sector before the end of 2019? Investors certainly hope the earnings will help. With legalization picking up steam in Mexico, the US might make some decisions soon. Many investors wonder how to invest in legal cannabis stocks. To learn more, read Cannabis Investment: How to Buy ACB, CGC, and Others.

Please follow 420 Investor Daily for analysts’ ratings and marijuana-related news and updates.


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