Categories AlphaGraphs, Analysis, Other Industries

Canopy Growth earnings preview: Q1 crucial in the recent turn of events

The last three months have been pretty rough for cannabis firm Canopy Growth Corporation (NYSE: CGC), with the stock declining 37%. Though most of this sell-off was attributable to industry-wide weakness, the exit (or termination) of its co-CEO Bruce Linton acted as a double whammy.

When the Canadian pot firm last reported earnings, it had missed both the top and bottom-line estimates. The management of Constellation Brands (NYSE: STZ), a major shareholder in the marijuana company, did not hide their disappointment on Canopy’s 2019 performance, during its last earnings conference call. After investing $4 billion into the cannabis giant, Constellation was clearly looking at better ROI.

Canopy Growth Co-CEO Bruce Linton exits
Image by Rex Medlen from Pixabay

Canopy will be hoping to turn the table when it reports first-quarter 2020 earnings results on August 14, Wednesday, after market close. Analysts expect Q1 revenues of $85.97 million (approx. CAD 113.6 million), which represents an improvement of 328% from last year, and almost 17% from the last sequential quarter.  

Meanwhile, analysts expect a cut down in net loss to $0.29 per share, helped by the optimization of production costs and improved product mix. This is expected to raise gross margin also sequentially to 22.65% from 15.9%.

cannabis stocks performance comparison

Taming the cannabis market

During the conference call, keep a close track of what the company plans to do with its enormous cash reserve. Since the legalization in Canada, weed’s demand has surged at such a rapid pace that producers are struggling to cope. With Constellation’s contribution safe in the wallet, Canopy is at an advantage here compared to a few other cash stricken rivals.

READ: Tilray Q2 earnings preview: What are the factors at play?

Canopy has already inked a few major deals – including those with US marijuana producer Acreage Holdings and plant extract-based products maker Keyleaf – but market observers feel there is still a lot to come.  

Also Read:  Earnings preview: What’s on the cards for Biocept in Q4

To meet the rising CBD demand, cannabis firms will be forced to take up more consolidations and partnerships in the years to come – and their effectiveness of these deals will decide their space in the industry.        

canopy growth Q4 2019 earnings results

CGC has a 12-month average price target of $52.33, which is at a 65% upside from Friday’s trading price.

Canadian rival Tilray (NASDAQ: TLRY) is slated to report financial results on August 13, while Aurora Cannabis (NYSE: ACB) is expected to announce quarterly earnings on August 20.

Listen to on-demand earnings calls and hear how management responds to analysts’ questions

Most Popular

A visual dashboard of Broadcom (AVGO) Q2 2020 earnings results

Broadcom (NASDAQ: AVGO) reported non-GAAP EPS of $5.14 for the second quarter of 2020 on revenue of $5.74 billion. While the earnings came in line with the analysts' estimates, revenue

Will Zoom (ZM) keep up the booming trend?

Video conferencing platforms and other workplace collaboration tools have become more popular nowadays. With most people confined to their homes, apps that allow us to stay in touch have become

Cloudera (CLDR) stays on course as cloud solutions gain significance during pandemic

Cloudera (NYSE: CLDR) once again proved its mettle by reporting impressive results for the April-quarter that was mostly marred by the market-turmoil spurred by the virus attack. Though the tech