Canopy Growth (CGC) (WEED) is set to report its second-quarter earnings results before the market opens on November 14. In the first two days of trading this week, the company has lost 11.5% of its stock value. MKM Partners’ lowering of its price target and Cronos Group’s (CRON) weak third-quarter performance appear to have dragged Canopy stock down.
On Monday, MarketWatch reported that MKM Partners analyst Bill Kirk had lowered his revenue estimate from 114.5 million Canadian dollars to 95.4 million Canadian dollars, citing excess inventory and a fall in cannabis prices for the change. He added that despite the fall in legal cannabis prices, they’re still higher than black market prices. The price decline has, therefore, failed to drive legal sales. Kirk has lowered his price target for Canopy Growth to 30 Canadian dollars from 33 Canadian dollars.
On November 12, Cronos Group reported third-quarter revenue of 12.7 million Canadian dollars, which fell short of analysts’ estimate of 14.14 million Canadian dollars. The decline in cannabis prices was one of the main reasons for its lower revenue. In the quarter, the company’s revenue per gram stood at 3.75 Canadian dollars, a fall of 48% from 7.18 Canadian dollars in the third quarter of 2018.
Canopy Growth’s production costs are on the higher side compared to its peers. Investors fear that the impact of pricing pressure will be more significant on CGC, which appears to have dragged its stock down.
Also, on November 13, Canopy Growth was trading 2.6% lower at 12:05 PM ET. The weakness in the marijuana sector due to Charlotte’s Web Holdings’ (CWEB) (CWBHF) weak third-quarter performance appears to have caused the company’s stock to fall.
Analysts’ expectation from Canopy Growth
For the second quarter, analysts expect Canopy Growth to report revenue of 108.48 million Canadian dollars. Analysts’ revenue estimates represent a year-over-year rise of 365% from 23.32 million Canadian dollars in the second quarter of fiscal 2019, while sequentially, it’s an increase of 19.9% from 90.48 million Canadian dollars in the first quarter. We expect growth in both medical and recreational cannabis sales to drive the company’s revenue.
Analysts expect CGC to report EBITDA of -92.90 million Canadian dollars, an improvement from -201 million Canadian dollars in the second quarter of fiscal 2019. However, sequentially, it marks a marginal decline from -92.06 million Canadian dollars. Pricing pressure and higher operating expenses could lower the company’s EBITDA during the quarter.
In the last five quarters, Canopy Growth has outperformed analysts’ revenue estimates three times. However, it’s beaten analysts’ EBITDA estimates only once in the period.
Tomorrow is a big day for the cannabis sector. Aurora Cannabis (ACB) will also be reporting its fiscal 2020 first-quarter earnings. For a look at analysts’ estimates read Aurora Cannabis: Can It Boost the Industry in Q1? The sector will get a big boost if both companies manage to beat analysts’ estimates. Also, don’t forget to check out 420 Investor Daily for more marijuana news and updates.