Canopy Growth (NYSE: CGC) likely to lose in Q2 earnings battle on Nov 14

Canopy Growth Corporation (NYSE: CGC) (TSX: WEED) is slated to report its second-quarter 2020 earnings results on Thursday before the market opens. The bottom line will be hurt by an increase in costs and expenses specifically due to its investment in research and development efforts while the top line will be benefited by a solid harvest of cannabis.

The International medical business is expected to grow in the coming quarters with continued improvements to its export process and higher inventory levels available for export. In the global medical channel, Canopy sold 1,489 kilograms, of which 46% was softgels and oils, during the first quarter.

The bottom line will also be hit by modest headwind arising from the start-up costs related to its advanced manufacturing building and new bottling plant. Also, costs associated with developing vape, edible, and beverage products could widen the losses as the prospects of these in the markets will be available later this calendar year.

The company is expected to be beneficial by its focus shift towards optimizing the Mirabel, Delta, and Aldergrove facilities for yield and cost. Also, the company is likely to see a steady increase in recreational retail sales that will continue to be the primary channel for reaching new consumers.

Analysts expect the company to report a loss of CAD0.39 per share on revenue of CAD109.46 million for the second quarter. In comparison, during the previous year quarter, Canopy Growth posted a loss of CAD1.52 per share on revenue of CAD23.3 million. The company has failed to beat analysts’ expectations in all of the past four quarters.

Read: Cronos Group Q3 earnings review

For the first quarter, Canopy Growth reported a wider-than-expected loss due to the inclusion of a one-time charge related to the extinguishment of warrants. Revenues more than tripled driven by a 94% increase in dried cannabis sales in the Canadian recreational market. During the quarter, the company harvested a record of 40,960 kg of cannabis, exceeding expectations.

Meanwhile, the company remained under pressure from vaping fatalities as the Centers for Disease Control and Prevention (CDC) suspected THC-containing products to be the cause. Canopy Growth could incur a hole in its cannabis-based vape division due to the government crackdown of the products.

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