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Canopy Growth’s Loss Was Bigger Than Feared. The Stock Is Falling Hard.

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Canopy Growth reported a 36% drop in revenue from Canadian recreational cannabis sales compared with the the same quarter a year ago.

Chris Roussakis/Bloomberg

Canopy Growth stock is plummeting after the marijuana company delivered financial results that fell short of expectations.

The Canadian cannabis company (ticker: CGC) posted a per-share loss of 1.46 Canadian dollars (US$1.15) for its fiscal fourth quarter, while analysts had expected a loss of 30 Canadian cents, according to FactSet. Net revenue for the three months ended in March was C$111.8 million, below analysts’ expectations of C$130 million.

“Achieving profitability is critical and we have undertaken additional initiatives to streamline and drive efficiencies for our global cannabis business,” said CEO David Klein on Friday.

The stock (ticker: CGC) fell 16% to $4.68 on Friday morning. Canopy stock listed in Toronto (CA WEED) fell similarly to $5.95.

Compared to last year, revenue from the Canadian recreational cannabis business declined 36% to C$38.9 million in the quarter while medical sales fell 4% to C$13.1 million. Canopy’s revenue from products like BioSteel, which is a cannabis-based sports hydration drink, was down 3% to C$45.8 million versus the same quarter a year earlier. The company reported slowing marijuana sales in the fiscal third quarter as well.

“We think the cannabis market in Canada will continue to struggle,” said analyst Mike Hickey of Benchmark Research. At the same time, he said, “we don’t see a federal legalization path for [the company] in the U.S. in the near term, leaving limited operational options.” Hickey has a Hold rating on the stock.While the House has passed legislation decriminalizing cannabis on a federal level, experts believe widespread legalization won’t take hold in the Senate. However, a bill that prohibits regulators from penalizing banks working with cannabis businesses in states where the drug is legal may pass later this year. It is called the Secure and Fair Enforcement Banking Act, or SAFE Act.

Out of 20 analysts who cover the stock, 40% rate it at Sell or the equivalent, while 50% have it at Hold. Only two analysts have Buy ratings on the stock.

Write to Karishma Vanjani at [email protected]

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