All figures in CA$0. With the company reporting a better-than-expected third quarter, the worst may be finally over for this battered cannabis giant. The past few months have been tough for large-cap pot stocks.
With the company reporting a better-than-expected third quarter, the worst may be finally over for this battered cannabis giant. Between the departure of its longtime, iconic co-CEO, Bruce Linton, significant management team changes, and some startlingly high quarterly losses, Canopy Growth has lost much of its appeal over the past year. That massive loss, though, was due in lar… Let's find out whether now's the right time to buy Canopy or whether the stock could still fall even further. By the time the company released its quarterly financials in mid-August, shareholders were shocked by a $1.4 billion loss. Whether because of Canopy's significant quarterly losses or the possibility of a major goodwill adjustment in the near future, there's a good chance that shares will continue to fall. Considering that Aurora and Tilray have both announced major layoffs, it wouldn't be surprising if Canopy follows suit as well in a similar move to cut costs. Data source: Canopy Growth, YCharts. Now we're seeing these same companies pay for this, with Aurora being just the first example. While this might seem pretty good on paper, Canopy's cash pile may not last as long as one might expect. Given everything, it's hard to justify Canopy's valuation, especially when companies like Aphria are trading at cheaper premiums and offer much more bang for their buck in terms of profitability. As analysts proceed to reevaluate the stock in light of this news, investors are faced with a conundrum. While pot sales in Canada were up 8.1% in December, bringing the nation's total non-medical cannabis expenditures to about $1.2 billion, that's not all that impressive when you consider that Colorado alone -- a state with a population of 5.7 million -- saw marijuana sales reach $1.8 billion.
Canopy hasn't been immune to this problem, reporting more than a year's worth of inventory stockpiled by the end of December (about CA$622 million worth). While Canopy Growth is still considered the leader of the cannabis industry, whatever prestige the company receives from this fact isn't enough to justify a pricey valuation. Skimming over its financial results, one quickly spots a few issues.
Considering that Aurora and Tilray have both announced major layoffs, it wouldn't be surprising if Canopy follows suit as well in a similar move to cut costs. Should Canopy end up having to face goodwill adjustments of its own soon, it wouldn't be surprising for shares to fall significantly as hundreds of millions if not billions of dollars are erased from its balance sheet.
The bigger problem lies elsewhere. Canopy Growth: Sell, Buy or Hold? Regarding international markets, Canopy has been doing pretty well. Canopy Growth (NYSE: CGC) has also had its fair share of difficulties.
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen.
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Canopy Growth Corp. wasn't one of them! Let me first acknowledge the elephant in Canopy Growth's financial statements, which could cause many investors to head for the hills: The company continues to lose money hand over fist. In comparison, Canada's entire population is about 37.6 million.
Although Canopy does have some hemp processing facilities in New York, the company primarily operates in the Canadian market.
While Canadian cannabis sales are growing, it’s worrying to see Canopy’s inventory levels expand at such a fast rate.