Canopy Growth’s (NYSE:CGC) weak Q1/2020 results should not surprise bulls. The company had already warned of a writedown and slow output in its last quarterly earnings call.
Even though harvest at record highs, the company did not meet consensus estimates. For now, the downtrend in CGC stock is firmly in place, favoring bears.
Canopy reported revenue up 250% as losses fell sequentially, to –C$92 million. Harvest nearly doubled Q/Q and is up 323% Y/Y, to 40,960 kg.
The company took a C$1.18-billion non-cash charge to extinguish a warrant liability. Cash levels fell by 30% to C$3.14 billion, due mostly to acquisition costs.
Cannabis investors face more uncertainties with Canopy, with no way to predict the clear real winner in the space. As market sentiment turns negative, speculation in this space will moderate. This could lead to CGC stock falling further. Still, consumers may turn to cannabis in tough times, instead of alcohol or tobacco.
For the rest of the year, Canopy Growth is squarely focused on driving demand. It will do so with an extensive training program with retailers across Canada. It will also ensure that it brings high-demand CBD SKUs to market.
Looking ahead to fiscal 2021, Canopy is committed to delivering positive adjusted EBITDA quarterly by that time. It is aligned with Constellation Brands (NYSE:STZ) in delivering positive net income in the medium term, within three to five years.
Canopy’s long-term goals did not change. While its last quarter is weaker than desired, the business goals for growth beyond that time frame is unchanged.
