Canadian pot producer Canopy Growth Corporation (TSX:WEED)(NASDAQ:CGC) reported its third-quarter earnings last week. It announced that for the period ending Dec. 31, 2021, its net revenue of $141 million rose by 7% from the previous period. But on a year-over-year basis, sales were down 8% as the business continues to struggle with consistent growth.
A key metric that many investors will undoubtedly focus on is the company's adjusted EBITDA number. And, unfortunately, the $67 million loss it incurred this past quarter was just a $1 million improvement from a year ago, as the company noted that while it reduced its selling, general and administrative expenses, worsening gross margins offset much of the impact of those savings. The company also burned through more cash this quarter, with free cash being a negative $168 million for the last three months of 2021, up from a negative $135 million a year earlier.
However, despite the uninspiring results, that didn't hurt the company's stock as shares of the cannabis business rose on the results, with the stock closing at a value of $11.71 on the TSX as of the end of the week – a 17% improvement from a week earlier when it closed at $10.01. But the rally could also be due to simply more widespread bullishness in the marijuana sector as cannabis stocks as a whole did well last week.
And although that could mean more gains for Canopy Growth's stock in the days and weeks ahead, investors should tread carefully with this business as it is still facing many challenges and the most recent results don't suggest it is out of the woods.
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