A new wave of optimism hit the marijuana sector last Friday, following Canopy Growth (NYSE :), (TSX 🙂 reported the most recently. The release ticked three important boxes: it showed steady improvement in revenues, showed effective cost-saving results and recorded a smaller than expected loss.
In short, the largest cannabis company in the world performed better than analysts expected. And the market responded almost immediately.
Canopy Weekly
Shares from the Ontario-based pot grower jumped, with a gain of more than 13% on Wall Street and a gain of nearly 16% on the day on the S & P / TSX Composite.
Moreover, there are early indications that this upward thrust was not only sustained during the trading after hours, but could persist until markets reopen today after the long weekend due to the day of US presidents and the family day vacation in Canada. An extra bonus: the momentum on Friday was at least strong enough to fascinate other industrial players.
Shares of Hexo Corp. (NYSE :), (TSX :), Aphria (NYSE :), (TSX :), Cronos Group (NASDAQ :), (TSX 🙂 and Tilray (NASDAQ 🙂 all closed on Friday, underlines the belief that Canopy continues to determine the scope to set the tone for the sector.
For industry viewers, it was almost as if the results allowed stakeholders, who had held their breath, to exhale.
Positive sign, but there are more challenges ahead
Canopy reported net sales of USD $ 93.38 million (C $ 123.8 million) in the third quarter, which translated into an adjusted EBITDA of a loss of $ 69.2 million (C $ 91, 7 million). Bloomberg analysts reportedly predicted C $ 105.4 million in revenue and an adjusted loss of C $ 110 million in income before interest, taxes, depreciation and amortization. Operating expenses decreased by 14% over the three-month period compared to the previous quarter and amounted to USD 174.8 million (C $ 231.7 million). Canopy's net loss was USD $ 93.65 million (C $ 124.16 million).
The relatively good results, although a positive sign, do not mean that the industry has wrestled its challenges into submission. But how it continues to manage these challenges – including a whole new category of obstacles that must be overcome if the rollout of cannabis-infused drinks and other edible products escalates – will be another reason why industrial viewers continue to pay attention to Canopy.
In the end, Canopy was the first major pot producer to oust its high-profile CEO, a movement that several companies have reflected in recent months with radical business shakes.
But after the commotion, reality still needs to be addressed. This latest report contains the first results posted by Canopy & # 39; s new CEO, David Klein. The former executive of Constellation Brands (NYSE :), who came from the company that is Canopy's largest shareholder, made it clear that more changes to the "right size" of the company are coming. This can indicate an area where Canopy could follow the package – workforce reduction.
Various cannabis growers on both sides of the Canada-US border have significantly reduced the number of employees on the payroll since the beginning of 2020 in an effort to cut costs and improve their results. Earlier this month, Edmonton Aurora Cannabis (NYSE :), (1945 ) (TSX 🙂 announced it closed 500 jobs from its payroll, including around 25% of its head office positions.
The announcement came on the same day when it was revealed that the CEO of the company, Terry Booth, would resign. Dismissals were also announced at the beginning of February at Tilray. The British Columbia-based company said it would shorten approximately 10% of its workforce to reduce costs.
As far as Canopy & # 39; s Klein is concerned, in interviews after reporting the figures, he made one thing clear: his goal is to map out a course for profitability for Canopy. The company's shares were closed last Friday at US $ 22.13 (C $ 29.98)
Will those benefits last? That is what everyone is going to see this week.
