Last week, Canopy Growth Corporation (TSX: WEED) (NASDAQ: CGC) plunged lower after recording a larger than expected net loss in the fourth quarter. Following the publishing of the earnings report, several broker-dealers lowered their respective price targets on the Canadian Licensed Producer (LP) and we are not surprised by this move.

We continue to have a cautious view on the Canadian cannabis market in the near and long-term. After the earnings report, other Canadian LPs came under pressure and we will continue to monitor how the sector is impacted by Canopy Growth.

Today, we have highlighted 5 key statistics from the Canadian LP’s earnings report and believe our readers need to be aware of these data points.

During the quarter, Canopy Growth reported a more than $500 million net loss and negative $122 million of adjusted EBITDA
When compared to the same quarter last year, net revenue fell by approx. 25% and we find this to be significant. Total global cannabis net revenue fell by 35% when compared to the same quarter last year and we will monitor the trend in future quarters
The management team has been highly focused on cutting costs and expects to save between $30 and $50 million on costs of goods sold and between $70 and $100 million on sales, general, and administrative (SG&A) expenses over the next 12 to 18 months
Canopy Growth enhanced its leverage to the North American cannabis market by announcing plans to acquire Wana Brands and Jetty Extracts. We are bullish on these cannabis brands and will monitor how the company benefits from these agreements once there is regulation change in the United States
As of March 31st, Canopy Growth reported to have $1.4 billion of cash and Short-term investments. This is almost $1 billion lower than the amount reported as of March 31, 2021, and we find the decrease to be substantial. The decrease is primarily attributed to EBITDA losses, capital investments, and the upfront payment made as consideration for the option to acquire Wana Brands

Although Canopy Growth reported quarterly earnings that missed expectations, its balance sheet remains one of the strongest in the sector. Going forward, we will continue to monitor the trend and how the management team executes on a cost cutting strategy. After the earnings report, we believe the name of the game for Canopy Growth is execution and consider the next two quarters to be crucial for the business.

If you are interested in learning about Canopy Growth’s earnings report, please send an email to support@technical420.com with the subject “Canopy Growth Reports Earnings” to be added to our distribution list.

Authored By

Michael Berger

Michael Berger is Managing Partner of StoneBridge Partners LLC. SBP continues to drive market awareness for leading firms in the cannabis industry throughout the U.S. and abroad.