The company lost money and saw its net revenue fall during the fiscal first quarter.
Last week, Canopy Growth released its fiscal 2020 first-quarter earnings report and the results weren’t pretty. The earnings report showed that the company not only lost money but that its revenue fell from the previous quarter.
This caused Canopy’s stock to fall nearly 15%, though the company’s shares are up slightly as of Monday morning. Analysts across the board slashed the company’s price target, citing the company’s “lackluster performance” as the reason.
An Overview of the Earnings Report
During the first quarter, Canopy’s net revenue came in at $90.5 million Canadian. This is substantially higher than the company’s revenue from a year earlier. However, it still fell short of the C$109 million forecasted by analysts.
Canopy’s production was up during the first quarter, but the company lost quite a bit of money. The total losses came to C$1.28 billion, although this figure isn’t quite as bad as it sounds. Most of the losses are related to a deal by Constellation Brands to acquire cannabis operator Acreage Holdings.
For Canopy, the most damaging part of the earnings report is the fact that the company’s net revenue fell 4% from the previous quarter. That’s a far cry from the 17% gain analysts expected.
During the fourth quarter, Canopy Growth’s reported sales from cannabis oil and softgels was C$36.5 million. During the first quarter, these sales fell to a mere C$0.2 million. The company’s revenue fell by C$8 million simply due to anticipated product returns.
These results don’t seem to be an industry-wide problem since both Cronos Group and Aphria didn’t report any problems with their quarterly sales. It’s likely the company simply overestimated the amount of product needed during the fourth quarter, making business seem much better than it was.
Final Thoughts
It wasn’t all bad news from Canopy Growth. Mark Zekulin, the company’s interim CEO, seemed optimistic on the call with investors. He said that Canopy will earn C$1 billion in annualized revenue by the end of fiscal 2020.
Zekulin also said that investors can expect positive adjusted earnings by fiscal 2021. All in all, Zekulin estimated that the company is on the path to profitability within three to five years. And while that sounds good, it’s unclear whether the current management can deliver on these promises.
