With Canopy Growth (CGC) set to release their Q1 fiscal 2020 earnings on August 14, 2019, many investors are wondering what to expect.
Since their last earnings release, a major piece of news was that their CEO, Bruce Linton, was fired. Linton has said that accepting last year’s $4 billion investment from Corona beer distributor Constellation Brands Inc. (STZ) contributed to his downfall.
Constellation was frustrated by Canopy’s growing losses, so they put the pressure on CGC‘s executive team. Constellation Chief Executive William Newlands expressed this sentiment in the company’s most recent earnings report.
“While we remain happy with our investment in the cannabis space and its long-term potential, we were not pleased with Canopy’s recent reported year-end results,” Newlands said.
“However, we continue to aggressively support Canopy on a more focused long-term strategy to win markets and form factors that matter, while paving a clear path to profitability.”
Canopy Growth looking forward
Investors will be pining for strength from CGC as its next earnings release draws closer. Analysts are anticipating CGC to post earnings of -$0.29 per share, marking year-over-year growth at 6.45%.
The recent changes to analyst estimates for CGC are important, as these revisions elucidate the constantly changing nature of near-term business trends. Some analysts interpret these positive estimate revisions as a favorable for CGC‘s business outlook.
Comparatively, in Q1 of fiscal 2019, Canopy Growth reported approximately $26 million Canadian (US$20 million) in gross revenue, and a net shortfall of CA$91 million, or CA$0.40 per share ($69 million and $0.30, respectively).
Fast forward to the most recently reported quarter, Q4 of fiscal 2019, and net revenue more than quadrupled on a year-over-year basis to CA$94 million ($71 million).
The only catch here is that the double-digit increase didn’t come from cannabis sales – it came from the company’s recent acquisition of vaporizer manufacturer Storz & Bickel. Concurrently, net loss was CA$323 million, or CA$0.98 per share ($246 million and $0.74, respectively).
Throughout the previous four fiscal quarters, CGC‘s bottom-line deficits have dove deeper than analysts had anticipated, and some of these discrepancies have been quite notable.
During Q2 of fiscal 2019, the company’s net loss per share was the equivalent of $0.89, but analysts had only been expecting a shortfall of $0.15. In Q4 of the same year, the collective estimate was for a $0.26-per-share net loss.
But this is part of an overarching trend that can be seen across the cannabis sector, as many cannabis companies are on a spending spree in an effort to build scale.
So far, building scale is something that Canopy Growth has done effectively, becoming one of the world’s largest cannabis stocks, in terms of market capitalization.
CGC has accomplished numerous acquisitions in addition to Storz & Bickel. Canopy also made a deal to purchase U.S. grower and dispensary licensee Acreage Holdings, but that arrangement is conditional pending revision of federal cannabis regulations.
Canopy Growth is also on track to have upwards of 5 million square feet of grow operations in Canada by the end of next year. And it’s also quite active overseas. Notably, CGC is licensed to cultivate up to 35 million square feet of cannabis in Colombia.
But the elephant in the room that concerns most investors is the Canadian oversupply dilemma. With a mounting oversupply of cannabis, many analysts are wondering who will actually purchase this weed.
Canopy Growth stock has plummeted nearly 40% since the end of April 2019.
Canopy Growth Corp. (CGC) was trading at $31.18 per share on Thursday afternoon, down $1.46 (-4.47%). Year-to-date, CGC has declined N/A%, versus a 10.93% rise in the benchmark S&P 500 index during the same period.
This article is brought to you courtesy of ETFDailyNews.com.
About the Author: Eric Bowler
Eric Bowler is an accomplished journalist providing in-depth insights for more than two decades. Over the past several years his focus has been on the marijuana industry, with a special interest in cannabis growth stocks. His daily coverage of the industry keeps him on top of the key trends with the goal of helping investors make well-informed decisions.