The third-quarter results of Canadian legal weed behemoth Canopy Growth broke past estimates late Friday, lifted by a larger shop count and a more solid cost-reducing strategy. The company's shares rose at the outset but later trimmed off advances sharply, while other pot stocks stretched their rally Friday.
The Canadian cannabis producer disclosed a net revenue of CAD124 million, rising nearly 50 percent year-on-year and 61 percent quarter-on-quarter. The earnings easily surpassed Wall Street consensus' forecast of CAD$105.5 million. Stocks were trading 15 percent higher as mid-day, Friday.
Wall Street rested to record-high levels after its most recent climb. Investors are still discussing whether the coronavirus epidemic will have a drastic effect on the world economy, with increasing death tolls but also indications of optimism that a vaccine may arrive. The Dow Jones was down 9 points to 29,415, the S&P 500 picked up 2 points to 3,375 and the Nasdaq Composite rose 12 points to 9,725.
Canopy's new chief executive officer, David Klein, said during the company's conference call that Canopy will take further measures to "right-size" operations in the next three quarters. Klein stated that the company should pull back on acquisitions and mergers, exert more effort to align its marijuana supplies with demand, and think more about "where we are not going to play as well as where we are going to."
Last summer, Canopy's board of directors -- which is controlled by Constellation -- terminated then co-chief executive officer Bruce Linton. Klein, Constellation's former chief finance officer, became Canopy's CEO last month.
Canopy also posted a loss of CAD$91.8 million in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). That was a major change in the second quarter from its adjusted EBITDA loss of CAD$155.8 million. It was also much better compared to analysts' projections for a CAD$110 million loss.
Canopy's strong figures showed the efforts the producer has undertaken to boost its financial performance on multiple fronts. Net earnings were up from its level three months earlier to 14 percent, also allowing for the one-time effect of the restructuring charges Canopy had in the previous months. Price management was clear in the meantime, as operating expenses dropped 15 percent on both payroll and stock-based compensation cuts.
Despite the larger marijuana stocks cliff-dive, Canopy is still the most profitable pot firm in Canada. Canopy Growth shares, like other marijuana stocks, plummeted last year as the cannabis industry in North America retrenched. After years of acquisitions and overexpansion, businesses shook leadership and shed employees.
