Canopy Growth Corp Earnings Preview

Canopy Growth Corporation (TSX:WEED), one of the Canadian marijuana stocks, is expected to announce its Q4 2019 financial results on June 20, 2019

SmallCapPower | June 18, 2019: Canopy Growth Corporation (TSX:WEED) (NYSE:CGC), one of the Canadian cannabis stocks and Canada’s largest cultivator by market cap, is expected to report Q4 2019 financial results after markets close on June 20, 2019. Today, we are going to look at what investors should expect from Canopy Growth’s fourth-quarter results. Investors should expect revenues to grow modestly, albeit with an increased loss from operations.

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Modest revenue growth expected to continue. During Q3 2019, the Company posted net revenue (sales less excise taxes) of $83.0M, representing a 256% increase sequentially over Q2 2019, when revenue totaled $23.3M. Canopy Growth sold 10,102 kg (kilograms and kilogram-equivalents) worth of cannabis during the quarter. Fourth-quarter results are expected to improve slightly, as management indicated on the Q3 earnings call that additional greenhouses are expected to come online in the fourth quarter. Due to additional capacity coming online, analysts are expecting Canopy to bring in $93.0M in revenue for the fourth quarter (17 estimates).

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Cash burn likely to increase. Canopy Growth generated a loss from operations of $157.3M in its last quarter. This is likely to increase as the Company continues to ramp up operations and expands globally. Canopy’s R&D investments into edibles, beverages, and clinical studies are expected to continue to drain its cash balance, in addition to the Company’s M&A activities. CGC has also taken advantage of the passing of the U.S. Farm Bill by allocated ~150.0M for industrial hemp operations in New York. With Canada set to legalize cannabis edibles and concentrates on October 17, 2019, we expect that Canopy Growth will continue making investments into consumables, as management announced they are working on zero-calorie cannabis beverages with a short onset and quick offset to mimic the effects of beer. As of Q3 2019 (December 31, 2018), Canopy Growth had $4.9B in cash and cash equivalents on its balance sheet. Even with all the Company’s investments and M&A activity, Canopy’s cash balance will likely exceed $4.0 Billion at the end of Q4 2019. This should result in the Company having sufficient cash to sustain and grow operations, which should lead to profitability in the long run.

Key takeaways. Canopy Growth is the largest player in the cannabis space, and this is unlikely to change anytime soon. The Company has a cash war chest and should continue to deploy this to grow the business and sustain operations. Revenues should increase steadily as new business lines are added, such as the December acquisition of Birks and Stroke (manufacturer of the Volcano Vaporizer), and the Company continues to generate recreational sales from the Canadian market. As with all rapidly-growing companies in emerging industries, Canopy will continue to have to spend cash to grow. However, management will need to execute on its business strategy over the next few years to turn the Company profitable.

  • Market Cap: $19.0 Billion
  • YTD Return: 52.7%
  • 90-Day Average Trading Volume: 2,226,000
  • Q4/19 Consensus Revenue Estimate: $93.0 Million (17 estimates)
  • Earnings Date: Thursday, June 20, 2019, after markets close

Shares of Canopy Growth Corporation ended Monday’s trading session 1.4% higher at C$56.05. Canopy Growth stock trades at a market cap of C$19.0 billion.

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