Ontario-based Canopy Growth’s shares and sales are up in its fiscal Q3 of 2020 beating many cannabis analysts’ bottom line and net revenue predictions. Canopy Growth’s sales topped $124 million during the quarter, a 62 percent increase from the $76 million reported in the previous quarter.
After the announcement on Friday, Feb, 14, Canopy’s stock grew almost 20 percent and influenced more positive changes across the marijuana sector. Canopy Growth’s rise to the top of the cannabis production sector in Canada is a boon for investors and the industry as a whole.
Canopy Growth Improves Net Revenue Quarter-Over-Quarter
Canopy Growth’s (NYSE: CGC) recent success in improving net revenue and minimizing loss has been due largely to an increased retail presence and growing product sales. With a slow and steady rollout of stores, Canopy is reducing its marijuana surplus and meeting consumer demand.
Canopy Growth’s new CEO, David Klein, told Yahoo Finance Canada, “adding more stores is a pressure relief valve for some of the ills of the cannabis sector at the moment. The biggest driver for us is being consistently on the shelf for more consumers.”
Investor optimism is tempered by the reasonable, but considerable expenses and bottom line. Fortunately, Canopy Growth has reduced its EBITDA loss (an indicator of the profitability of a business) to $92 million, compared to $156 million in the previous period.
Financial analysts believe that Canopy Growth has a 22 percent share of Canada’s recreational cannabis market. Overall, Canopy’s recreational pot sales grew. The company’s marijuana paraphernalia and retail business acquisition also helped get their brand of premium pot in front of more customers.
New Leadership, New Strategy
Canopy Growth’s recent earnings are a far cry from their losses during 2019 resulting in the firing of CEO Bruce Linton in July. During the months-long search for a new CEO, stocks plummeted toward the end of the year, but are showing considerable improvements and signs that the cannabis slump may be over.
Klein told Yahoo Finance Canada that during the first four weeks in his role, he implemented a thorough strategic review of the business operations to define a path toward profitability and cash flow on their next quarter’s results.
Klein was the former chief financial officer of Constellation Brands, the maker of Corona beer, and current partner of Canopy Growth. Klein has many plans including a hope to enter the U.S. market with a pending deal to acquire New York-based Acreage Holdings for $3.4 billion in the event that cannabis becomes federally legal in the U.S.
While federal legalization may seem like a farfetched idea, the U.S. is closer than ever to repealing prohibition. Senator Bernie Sanders has vowed to legalize marijuana within the first 100 days of office if elected president and many other Democratic front-runners have shown support for marijuana legalization.
Constellation Brands & Cannabis 2.0
Canada’s Cannabis 2.0 market enhancement allowed for the sale of edibles and ingestible marijuana products. Canopy Growth’s partnership with major beverage-making partner, Constellation Brands, puts both companies in an enviable position to take over the Canadian recreational cannabis market.
On Nov. 25, 2019, Canopy Growth received a license for its 150,000-square-foot facility in Smith Falls, Ontario, where it will produce marijuana-infused beverages and other infused products. Currently, however, the company is delaying rolling out beverages to get the cannabinoid ratios correct. For now, the facility is only producing THC chocolate bars.
Canopy Growth plans to launch three flavors of Tweed RTD (ready to drink) premixed canned drinks. Canopy also plans to release two flavors with partner Houseplant, four flavors of seltzer sparkling water beverages, a high-THC carbonated beverage, and a line of marijuana beverage mixers.
Tapping The International Market
In today’s highly-competitive cannabis sector, multi-national marijuana brands and overseas investments are becoming the norm. Canopy Growth is betting big on the international cannabis market. It currently has the second-biggest overseas presence with a presence in 16 countries besides Canada.
Canopy Growth brought in CA$18.1 million from overseas medical marijuana sales during fiscal second quarter. That number accounts for 19 percent of the company’s gross revenue before adjustments. Quarterly growth of 72 percent in the international market revenue in showing a trend of increasing investments in companies overseas.
Cannabis stocks have been having a strong showing due to the surprising improvements by Canopy Growth in terms of net revenue and the bottom line. Canopy Growth is slowly but surely separating itself from the pack, especially competitor Aurora Cannabis. The competition is becoming even stiffer among Canadian producers, and only the ones able to adapt to the market and regulations will remain on top.
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