Two of the major cannabis companies released their latest earnings last Friday, and both pot growers saw their earnings soar. But they fell short of analysts' expectations.
With these misses putting downward pressure on the stock prices of both Canopy Growth (NASDAQ:) (TSX:) and Cronos Group (NASDAQ:) (TSX:), investors may still wonder what each company's promised path is. to profitability. Indeed, investor sentiment is starting to sound like that cranky toddler in the backseat of the family car asking, "Are we there yet?"
“We are almost there. It won't be long," said the drivers. Forced to be patient, however, does not bring a smile from someone else who goes along.
Shares of Canopy Growth remained relatively stable on Monday, closing just 0.2% on the day and climbing back up after a slump in previous trading.
On Friday, the Canada-based marijuana grower trading on NASDAQ reported net sales of C$136 million (USD$108.3M (NYSE:)) for the period ending June 30. That was 23% more than in the same period the previous year. But the bottom line was the loss of C$64 million (USD$50.9 million) on an adjusted basis.
The other disappointment: the once largest cannabis company in the world also lost market share.
On the bright side, the large US market remains a major focus for Canopy, and it is actively building brand awareness, especially with its CBD products and its partnerships, including with celebrities like Martha Stewart.
In addition, it continues to be a leading innovator in the industry, producing a wide range of products that fall into the cannabis 2.0 category of edibles, oils and beverages that are aimed at a customer base that is not the average pot smoker. But the downside is that many of these new products won't be on sale until after the second quarter of 2022.
So, when will it become profitable? The company's response was that it remained "committed" to "achieving positive adjusted EBITDA by the end of fiscal 2022."
After the release of the latest figures, some Canadian analysts reporting Canopy lowered their price targets for the stock. They include Canaccord Genuity, which lowered its price target from C$25 from C$30; CIBC lowered its price target from C$30 to C$27; Piper Sandler lowered his price target from $24 to $19, while Stifel came in at the lowest price of $18, down from the previous figure of $21.
Canopy Growth closed yesterday on the Toronto Stock Exchange at $C24.03, $19.11 on NASDAQ, half a percent lower in Canada, -0.21% in US trading for the day.
Cronos : Misses Mark in Q2 Too
Meanwhile, Cronos Group's second quarter results – also revealed last Friday – rose 58% to C$15, 6 million (USD$12.4 million). But that was well below analysts' forecasts of C$18.6 million ($14.8 million).
As for adjusted EBITDA, like Canopy, it came in at a loss. In this case, a loss of C$49.8 million (almost $40M USD).
Cronos shares fell on the news Friday, but have since regained some ground, if not all. The stock closed at $7.22 on the NASDAQ yesterday, just over a percentage point lower on the day.
Over the past year, Cronos shares have risen about 29.5%. They are still well below the highest level they reached earlier this year, when they hit $12.26 in early February.
