Canopy Growth Stock: Big Takeaways from Its Latest Earnings Report

Canopy Growth Stock
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Canopy Growth Earnings Report Review

While 2018 hasn’t exactly been the kindest year to marijuana stocks so far, that hasn’t stopped several heavy hitters in the industry releasing impressive financial earnings reports. The latest Canopy Growth earnings report, for instance, once again solidified why the largest marijuana company in Canada is such an exciting prospect for investors.

Canopy Growth Corp’s (OTCMKTS:TWMJF, TSE:WEED) most recent quarterly report showed impressive spikes in the company’s marijuana sales and Canopy Growth revenue overall. (Source: “Canopy Growth doubles cannabis sales, while MedReleaf takes smaller strides,” Financial Post, February 14, 2018.)

Year-over-year registered patient growth showed a strong increase of 138%. Revenue similarly went up by triple digits in the past year, jumping 123% to reach CA$21.7 million, up from CA$9.8 million.

The cost of production also fell for the company, with the weighted average cost per gram to point of harvest decreasing 18% quarter-over-quarter.

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While quarterly revenue spiked, sales missed the mark predicted by analysts, falling short of the CA$24.2-million estimates. The company also registered about CA$11.0 million in losses. But that still doesn’t take away from the fact that sales doubled due to growing domestic sales alongside strong growth in international markets. (Source: “Canopy Growth Reported Losses in 3Q18 despite Surging Sales,Market Realist, February 14, 2018.)

The quarterly report was enough to put a positive light on the Canopy Growth stock forecast, leading to multiple days of gains since the company first released its financial earnings report.

The Canopy Growth earnings report is also worth delving into just as much for what it says about the future as its strong numbers.

First, Canopy has a commanding lead in revenue compared to its competitors, again strengthening its position as the largest and most dominant player in the market right now.

Another important development was the company’s increase in production. The company harvested nearly 8,000 kilograms of cannabis this quarter, an increase of 91% over the previous quarter.

What this means is that the company is ramping up its production in anticipation of the Canadian legalization of marijuana. Positioning itself to supply that green rush is a strong move that will benefit the Canopy stock forecast moving forward. Analysts and investors take note when a company is planning to take advantage of strong events like Canada’s legalization.

The company’s cannabis sales skyrocketed, hitting 2,330, up from 1,245 in the same quarter last year. The price per gram also jumped by CA$0.94, landing at CA$8.30 per gram.

International sales also reached a record high in Germany, topping seven figures for the first time, helping drive up the price per gram—all being supplied by domestic Canadian production

“The higher average price was due primarily to the improved mix of oil products, including oil-based soft gel capsules, and partly to the higher selling price of medical cannabis sold in Germany. The average selling price in Germany was about $12.61 per gram,” said Tim Saunders, Canopy’s CFO.

Canopy CEO Bruce Linton was also quick to point out in a call with analysts that, not only are the numbers impressive, the several moves that Canopy is making are looking to have big payoffs down the road.

Linton mentioned the CA$245.0-million deal with Constellation Brands, Inc. (NYSE:STZ), a major U.S. liquor company. The pair are looking to work together on products like drinks that would create more higher-yield products, pushing the price per gram up and increasing profit margins.

Canopy is also well-situated to take advantage of the Canadian marijuana legalization from a political standpoint.

Canopy is the only cannabis company to secure multi-year supply agreements with four provincial entities. The total value of those deals will eclipse 25,000 kilograms per year.

Internationally, the company showed success beyond Germany, attaining production licenses for Denmark and a provisional one for Jamaica.

And the final kicker: Canopy Growth holds about $400.0 million in cash on hand to fund any future acquisitions or expansions.

Analyst Take

The most recent quarterly results were excellent for Canopy Growth and marijuana stock enthusiasts more generally.

The industry is still prone to playing “follow the leader” now and again, which means that success at Canopy often translates to positive ripples throughout the market. And this most recent quarterly result is certainly a success.

While missing the analysts’ target sales was not ideal, Canopy stock more than made up for it by delivering strong numbers across the board that speak to its growth.

Furthermore, the company is displaying excellent foresight by ramping up production in anticipation of Canada’s legalization process, while also making savvy deals with political bodies to ensure that it is in prime position to supply cannabis to the hungry masses once legalization hits.

Overall, this is an excellent quarterly report for the company, and the boost in its stock price is evidence of the market’s reaction. Canopy Growth stock is still one of the stronger picks on the market for its mix of potential, fundamental strengths, and dominant market position as the top dog in marijuana.

Also ReadCanopy Stock Forecast: The Safest Bet to Play in the Pot Market Ahead of Legalization