Canopy Growth (NYSE:CGC) fell sharply when it reported weak results on June 21. Constellation Brands (NYSE:STZ) invested $5 billion in the company; the investment is not paying off just yet.
Note: all figures in CAD $.
Canopy’s fourth quarter revenue growth of 13% slowed compared to its 191% annual growth. Q1 output is expected to top 34,000 kilograms, with the company expecting further licensed capacity to come. The Smiths Falls HQ expansion is still underway, funded through the $5 billion from Constellation Brands.
Investors need plenty of patience holding Canopy Growth. It continues to wait for licensing in the U.S. through the Farm Bill. Still, its international licenses will cover over 35 million square feet of production and in places like Africa, Europe, and Latin America.
Canopy reported a few strong data points. Its kilogram/kilogram equivalents sold rose 269% to $9.3 million. But ASP (average selling price) for Canadian Medical rose just 2% to $8.17. ASP for International Medical rose by 4% to $13.91. But overall ASP per gram fell 11% to $7.49.
Canopy is not an international firm yet. It generated international medical sales of just $10.1 million. Investors need to wait until its Storz & Bickel unit adds meaningfully to totals.
Takeaway
The production ramp-up of next-generation recreational products will have associated costs, hurting near-term gross margin. As such, CGC stock is a wait and see stock and day trade for speculators.
