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Canopy Growth Might Impress Investors with Its Q4 Earnings


Nov. 20 2020, Updated 12:38 p.m. ET

Canopy Growth (NYSE:CGC)(TSE:WEED) will likely report its results for the fourth quarter of fiscal 2020 on May 29 before the market opens. So far, the stock has gained 31.3% in May on the NYSE and 29.3% on the Toronto Stock Exchange. Canopy Growth’s third-quarter earnings in February were a boon to the cannabis sector. Overall, the sector saw a string of bad news. Due to the pandemic, the marijuana sector is skyrocketing with a surge in sales. Let’s see if analysts expect Canopy Growth to report strong results like many other cannabis companies.

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What do analysts expect from Canopy Growth’s Q4 earnings?

Analysts expect the company to report revenue of 129.1 million Canadian dollars, which is a slight increase from the third quarter. For the fiscal year, analysts expect Canopy Growth to report revenue of 424.3 million Canadian dollars. The revenue could eventually increase going into fiscal 2021. In fiscal 2021, the revenue could be around 136.1 million Canadian dollars in the first quarter, 149.8 million Canadian dollars in the second quarter, 171.7 million Canadian dollars in the third quarter, and 191.2 million Canadian dollars in the fourth quarter.

Canopy Growth could report an EBITDA loss of 88.6 million Canadian dollars. However, the losses are lower compared to 91.6 million Canadian dollars in the third quarter. Analysts expect the EBITDA losses to continue into fiscal 2022, which doesn’t sound good. The company will have to work harder to lower its operating expenses and profitability anytime soon.

Meanwhile, analysts expect Aurora Cannabis (NYSE:ACB) to hit positive profitability by the fourth quarter of fiscal 2021. Management boasted that it could hit profitability by the first quarter. Aurora Cannabis’s third-quarter earnings were a surprise. Analysts had lost hope about seeing good earnings results from Aurora Cannabis. The company repeatedly disappointed investors last year. After executing the reverse stock split to save it stock, the company reported good revenue growth of 15.9% YoY.

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Better positioned to grow in the cannabis market

In Canopy Growth: BofA Is Bullish before Its Q4 Earnings, I discussed how Bank of America is bullish about the company’s long-term growth prospects. The fact that the company has strong financial backing with Constellation Brands (NYSE:STZ) and a strong leadership team under CEO David Klein gives it an edge over its peers. With many cannabis companies like MedMen struggle with finances, having a strong balance sheet is essential amid the pandemic.

Recently, Canopy Growth also launched its second wave of Cannabis 2.0 products, which depicts its plan to capture the market with innovative cannabis beverages after the pandemic retreats. The company should grow in the US CBD business, which has tremendous growth prospects. Constellation Brands might have decided to hike its stake in Canopy Growth from 5.1% to 38.6% of the total shares outstanding due to the growth potential.

In May, Canopy Growth stock has gained 31.6%, while Aurora Cannabis stock has gained 84.9%. Meanwhile, Cresco Labs (OTCMKTS:CRLBF) and MedMen have gained 33.1% and 102.1% in May.

We’ll know more about Canopy Growth’s growth strategies after its earnings. MedMen and Cresco Labs will also report their earnings this week. To learn more, read Will MedMen’s Q3 2020 Earnings Be a Relief? and Cresco Labs Announces Expansion in Ohio before Q1 Earnings.

Stay with us to learn more about the cannabis sector.


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