Canopy Growth stock drops on wider-than-expected loss but company sees growth opportunities in U.S. markets

By Steve Gelsi

Cannabis company says its gross profit grew as it cut expenses but its stock falls 7%

Canopy Growth Corp.'s stock fell 7% on Friday after the Canadian cannabis company posted a wider first-quarter loss on lower revenue, but the cannabis company said it's positioned for growth in the U.S. market as it scaled back its expenses.

Canopy Growth (CGC) (CA:WEED) said its first-quarter loss widened to C$127.14 million ($92.7 million), or C$1.60 a share, from C$41.86 million, or C$0.69 a share in the year-ago quarter.

Adjusted loss of C$1.63 a share fell short of the FactSet consensus estimate for a loss of C$0.46 cents a share.

First-quarter net revenue for the Canadian cannabis company fell to C$66.2 million from $C76.26 million, missing the analyst estimate of C$70.1 million. The company said the decrease was due to the company exiting some businesses.

Canopy Growth's stock fell 50 cents to $6.42 a share.

Canopy Growth said it narrowed its loss from continuing operations by 47% to C$29 million while growing its gross profit by 67% to $C23 million.

It also lowered its cost of goods sold by 31%, while cutting its selling, general and administrative costs by 24%.

Canopy Growth's American-based business, Canopy USA, will finish its acquisitions of Jetty Extracts, edibles maker Wana Brands and cannabis-dispensary operator Acreage later this fiscal year.

Canopy Growth Chief Executive David Klein said the company's focus on "profitable revenue generation" is producing positive results that are helping to "set the stage for growth" in the second half of fiscal 2025.

Canopy USA is positioning the company "to benefit from near-term market opportunities in the U.S.," he said.

The company also said it extended its term loan in a move that will help it pay for "strategic growth initiatives."

Bernstein analyst Nadine Sarwat reiterated a market perform rating on Canopy Growth and said the company missed analyst revenue forecasts for all of its business unit except for its medical cannabis sales in Canada.

Canopy Growth's Canadian cannabis net sales fell 6%, while rival Cronus Group (CRON) (CA:CRON) booked a 50% boost in quarterly sales in Canada, she said.

"It is evident that there are now clear haves and have-nots in Canadian cannabis," Sarwat said.

On the plus side, Canopy Growth managed to beat the analyst estimate for adjusted earnings before interest, taxes, depreciation and amortization with a negative C$5.3 million result, Sarwat said.

Canopy Growth's stock fell back a day after cannabis stocks saw an uptick following comments from U.S. presidential candidate Donald Trump, who said he's starting to "agree more" with measures to reform cannabis laws.

Also read: Cannabis stocks post sharp gains as Trump says he's starting to 'agree more' about reforms

-Steve Gelsi

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08-09-24 1420ET

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