Canopy Growth, the world's largest cannabis company by market capitalization, just saw its shares surge by more than 13 percent on Friday last week following the release of its better-than-expected quarterly results. The company managed to report revenues and profits higher than analysts' expectations, significantly raising investor confidence in its stock.
The cannabis firm reported net revenues of $123.8 million for its fiscal third quarter, exceeding consensus estimates of $108.7 million. The company reported a total net loss of $124.2 million for the quarter, equating to around 35 cents per share.
Canopy Growth was the first federally regulated, licensed, publicly traded cannabis producer in North America. As of April last year, it became the world's largest cannabis firm based on the values of its shares.
Analysts have pointed out that Canopy's encouraging results were a big relief to cannabis investors given its significant role in the sector. The cannabis industry is believed to be in the midst of a correction as most companies that had significantly surged during their initial launches have now slowly gone back down.
The situation has caused major players in the industry to enact major restricting in attempts to align their businesses with the performance of traditional markets. Canopy was the first to conduct a major overhaul of its corporate structure, booting its founder Bruce Linton in favor of former Constellation Brands CFO David Klein. The move was later emulated by other players, including California-based firm MedMen Enterprises and Canada-based firm Aurora Cannabis.
Canopy's better-than-expected fiscal third-quarter results managed to boost other cannabis firms. Cannabis firms such as Tilray, Hexo, and Aurora all closed higher on Friday after the release of Canopy's financial results.
Industry experts have pointed out that Canopy's encouraging results do not necessarily point to a significant market turnaround. A number of the smaller players are expected to go out of business, with only a handful of the major players likely to stick around.
Canopy currently has a $2.3 billion cash war chest to help it survive the ongoing challenges facing the industry. However, despite its substantial assets, the company will still need to significantly decrease expenses and make its operations more efficient.
During its earnings call on Friday, Klein did reveal plans to "right-size" the company within the next three months. This will apparently include the reduction in acquisition activity and an increase in focus towards the company's profit and loss statement. Last year was a particularly challenging year for the company, resulting in a drop in its stock prices of over 32 percent.
