Cannabis stocks slammed as earnings disappoint

The medical cannabis industry took a hit last week after the largest company in the sector in terms of market cap, Canada-based Canopy Growth, saw its share price decline after reporting lower-than-expected revenues in its first quarter (Q1) of 2020.

‘While strong harvest figures should allay crop failure worries, elsewhere we see little to reassure investors that significant [sustainable] sales growth and profitability will be visible in the near future,’ Jefferies analyst Ryan Tomkins said in a note.

Canopy Growth’s share price fell as much as 15% to CAD 36.11 in the wake of its Q1 earnings on Thursday last week. The stock closed 4.27% lower at CAD 35.66 on Monday.

Canopy Growth earnings miss mark

Despite generating net revenue of $90.5 million in Q1, it was well below analysts’ forecasts, with the company also falling short in terms of bottom-line estimates too, with Canopy Growth blaming its lacklustre performance on high expansion costs.

‘The company remains focused on laying the foundation for dominance in an emerging global opportunity,’ Canopy Growth CEO Mark Zekulin said. ‘This means investments in developing intellectual property, building brands, building international reach, and ensuring scaled production capability for current and future products.’

‘Second, we are fixated on the process of evolving from builders to operators over the remainder of this fiscal year, meaning that as our expansion program comes to a close in Canada, and as new value-add products come to market in Canada, we demonstrate a sustainable, high margin, profitable Canadian business,’ he added.

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Cannabis rivals see similar stock declines

Canopy Growth’s disappointing performance has helped drag its peers’ stock lower too, with rivals Tilray, Chronos Group and Aurora Cannabis all down.

Since August 13, Tilray has seen its stock lose more than 30% of its value. Meanwhile, Chronos and Aurora have seen a 13% and 11% decline in their respective share price’s over the same period.