Marijuana plants at a Canopy Growth facility in Ontario.
Chris Roussakis/Bloomberg
Canopy Growth‘s shares slipped Wednesday even though the Canadian cannabis company reported higher than expected revenue as sales of other products helped offset a year-over-year decline in Canadian sales of marijuana.
The company posted a loss of 28 Canadian cents a share, or 22 U.S. cents, in line with analysts’ predictions, for the three months ended in December. Revenue in the third quarter of Canopy’s fiscal 2022 quarter was C$141 million, above analysts’ expectations for C$135.9 million.
The stock declined 1.6% to $9.77 as the market opened Wednesday, after gaining in premarket trading. It has declined 12% year to date.
Canopy Growth (ticker: CGC) said its CPG business had a record performance both from BioSteel, a recently acquired sports hydration business, and Storz & Bickel, its medical vaporizer arm, while it begins to stabilize the Canadian business.
BioSteel and Storz & Bickel achieved record quarterly revenue of C$17 million and C$25.2 million, respectively. The CBD-based hydration maker’s revenue was 130% higher than the third quarter of fiscal 2021, driven by expanded distribution. Storz & Bickel had new product launches, the company said.
MKM Partners analyst Bill Kirk said that because expectations for Canopy have grown progressively less upbeat, and because the stock has fallen some 44% over the past three months, he thought investors would view the results positively. Kirk has a Buy rating on the stock and a C$17 price target on the stock. When Canopy reported its second-quarter results, it pushed out its target for when it will achieve positive adjusted Ebitda target partly due to market-share challenges in the Canadian recreational business.
Overall revenue in the quarter was 8% lower than in the year-earlier quarter due to a decline in Canadian cannabis sales. Canadian cannabis revenue, both recreational and medical, was down 21% to C$60.7 million versus last year. Global net revenue from cannabis was C$83 million, down 20% from the same quarter a year earlier.
“With a renewed sense of urgency, we are focused on achieving profitability in Canada by taking additional steps to simplify our business and optimize our expenses, while making strategic investments in key growth areas,” said interim CFO Judy Hong.
Kirk believes that the U.S. is ultimately the best opportunity for the company.” The timing of U.S. THC [legalization] is uncertain but is worth more than all other markets combined,” he said.
Write to Karishma Vanjani at [email protected]
