EARNINGS AND GUIDANCE: On Thursday, Canopy Growth reported a third quarter loss per share of (C38c) compared to C1c last year on net revenue of C$83M, surpassing analysts' consensus estimates of C$78.7M. Third quarter net revenue was up 282% compared to 3Q18 revenue of $21.7M. Oils, including the company's Softgel capsules, accounted for 33% of product revenue, up from 23% of product revenue in the same period last year, demonstrating an increased demand for value-added formats. During Q3, approximately 30% and 42% of recreational and medical sales, respectively, were comprised of oils, including Softgel capsules. The company said, “In the transition from a ‘medical marijuana’ business to a business producing clinically proven cannabinoid therapies, the company experienced a decline in its Canadian medical market demand in the quarter. The decline may be attributed to the initial adjustment to the available legal recreational market which patients can also access. Additionally, medical revenues reflected a migration to a tighter medical product range as well as elevating and re-focusing Spectrum Cannabis to a more pure medical/pharma focused brand proposition.” International medical revenues, consisting primarily of sales in Germany, increased by 170% over the same quarter in the prior year to $2.7M.
EXECUTIVE COMMENTARY: "Our successful first full quarter with recreational sales in Canada reinforces our long-held strategy of making meaningful investments early in order to secure market share," said co-Chief Executive Officer Bruce Linton. "With a strong cash position, we added strategic assets and IP through acquisitions to accelerate the sophistication of our inputs with ebbu, and our consumer-facing outputs with Storz and Bickel. He added that "We have developed an unprecedented and unparalleled fully integrated platform at scale and will continue to expand by making strategic production investments in regions with federally permissible paths to market for our cannabis and hemp offerings. We believe this strategy will develop a significant and sustained return on invested capital over the long-term."
CFO TRANSITION: Along with its earnings report, Canopy Growth announced that Chief Financial Officer Tim Saunders has informed the company of his decision to retire in mid- to late-2019. Saunders will continue to serve as CFO until his successor has transitioned into the role. The search for Saunders' replacement is already in progress, with candidates identified, and the company expects to announce his successor in the next few months.
MOMENTUM ON TRACK: Following Canopy Growth’s earning release, Piper Jaffray analyst Michael Lavery noted that the revenues were modestly below his C$87M estimate, but ahead of consensus of C$81M. The analyst considers this quarter's momentum "to be a good step in its ramp-up trajectory as the Canadian adult-use market builds." Lavery continues to estimate a $250B-$500B potential long-term global cannabis market, with a $15B-$50B near-term opportunity, and he believes Canopy is well-positioned in the sector. The analyst keeps an Overweight rating on the shares with a $60 price target.
OTHER CANNABIS STOCKS: Publicly-traded companies in the space include Aurora Cannabis (ACB), Aphria (APHA), CV Sciences (CVSI), CannTrust Holdings (CNTTF), Cronos Group (CRON), General Cannabis (CANN), Tilray (TLRY), InnovativeIndustrial Properties (IIPR), India Globalization Capital (IGC), ICC International Cannabis (KNHBF), Biome Grow (ORTFD), MediPharm Labs (MLCPF), Indiva (NDVAF), OrganiGram (OGRMF), KushCo (KSHB), MedMen Enterprises (MMNFF), Elixinol Global (ELLXF), Planet 13 Holdings (PLNHF), Wayland Group (MRRCF) and Khiron (KHRNF).
PRICE ACTION: Canopy Growth is up 3.3% to $47.59 just after noon.
“Rising High" is The Fly's recurring series focused on cannabis stock news.
Canopy Growth
+1.5 (+3.26%)
Aurora Cannabis
-0.04 (-0.56%)
APHA
+
CV Sciences
+ (+0.00%)
CNTTF
+
Cronos Group
+0.48 (+2.31%)
Trees Corporation
+ (+0.00%)
Tilray
+0.02 (+0.03%)
Innovative Industrial Properties
+3.62 (+5.98%)
IGC Pharma
+ (+0.00%)
ICC International Cannabis
+ (+0.00%)
ORTFD
+
Changed to MEDIF
+ (+0.00%)
INDIVA
+ (+0.00%)
Organigram
+ (+0.00%)
KushCo Holdings
+ (+0.00%)
MedMen
+ (+0.00%)
Elixinol Global
+ (+0.00%)
Planet 13 Holdings
+ (+0.00%)
Wayland Group
+ (+0.00%)
Khiron Life Sciences
+ (+0.00%)