Pot stocks are falling hard today after industry giant Canopy Growth Corp (TSX:WEED)(NYSE:CGC) released its year-end results yesterday.
The company posted a big loss and warned that Q1 of 2020 might not be strong either as it expects to see a non-cash charge related to its deal with Acreage Holdings (CNSX:ACRG.U) that will "have a materially negative impact on net income."
Given that Canopy Growth posted a loss of $323 million on net sales of $94 million, that’s a big concern for investors. Even with the benefit of fair value gains, the company’s operating loss was still over $174 million.
And so, it’s no surprise that Canopy Growth fell more than 8% in trading during trading on Friday morning. Other pot stocks, however, were also down as rival Aurora Cannabis Inc (TSX:ACB)(NYSE:ACB) dropped by 4% and Hexo Corp (TSX:HEXO) declined by a similar amount as well.
With Canopy Growth being an industry leader, if it does poorly, it can often weigh down other stocks as well. After all, if it runs into problems, it’s likely that other, smaller players aren’t going to do a whole lot better.
And with reports that there could be an excess supply in Canada as early as this year, things could be getting even worse for producers as that’ll result in lower prices and even tighter margins.
Although there’s lots of growth expected in the industry in the years to come, with many competitors it’s going to only get more difficult to be able to maintain strong market share while producing good margins.
