Canadian cannabis producers Canopy Growth (CGC) and Cronos (CRON) both reported quarterly revenue that missed expectations on Friday. Canopy Growth stock and other marijuana stocks fell.

The companies reported the results as Canada’s cannabis industry deals with heavy competition and tries to shake off weaker results earlier this year that executives have blamed on coronavirus-related restrictions.

The results also continued a trend of positive income — but with complications — for the U.S. listed Canadian marijuana stocks, as they seek a path to profitability.

Canopy Growth Earnings

Canopy Growth’s sales rose 23% to 136.21 million Canadian, below forecasts for 152.63 million Canadian dollars.

Canopy Growth reported net earnings of 390 million Canadian. But that was driven largely by other income totaling 581 million largely due to “non-cash fair value changes” of 601 million Canadian.

Revenue rose 23% to 136.21 million Canadian. That was below views for 152.63 million Canadian dollars.

The company earned 84 cents a share Canadian, beating estimates for a loss of 26 cents a share. Canopy’s Adjusted EBITDA loss was 64 million Canadian.

Canopy said it remained “committed” to “achieving positive Adjusted EBITDA by end of fiscal 2022.”

Canopy in June said it was “on track” to reach positive adjusted EBITDA — or earnings before interest, taxes, depreciation and amortization — during the second half this fiscal year. But analysts have cast doubt on that target. The company is trying to focus more on premium cannabis products.

Cronos Group Earnings

Meanwhile, Cronos’ sales jumped 58% to $15.6 million, missing forecasts for $18.6 million. The company reported positive income from operations, helped by a gain on the revaluation of derivative liabilities.

The company reported earnings per share of 15 U.S. cents, compared to estimates for a loss of 10 cents a share. Adjusted EBITDA came in at a $49.8 million loss.

Cronos also named Bob Madore as chief financial officer, effective Aug. 9, who will succeed Jerry Barbato.

Marijuana Stocks

Canopy Growth stock was flat, at 19.14 in the stock market today. Shares have a weak 9 Composite Rating. Their EPS Rating is also weak, at 17. The stock’s relative strength line, which compares its performance to the S&P 500, has largely fallen this year, after the meme-stocks community helped catapult marijuana stocks higher early this year.

Cronos fell 0.9%. Among other Canadian marijuana stocks, Tilray (TLRY), whose results last week included an indirect path to positive net income, rose 0.1%.

Aurora Cannabis (ACB) slipped 0.5%, and Hexo (HEXO) gave up 0.7%.

‘Dual Headwinds’ To CGC Stock

Canopy, when it reported its last round of results in June, lost more than expected and said lockdowns could continue to haunt its recreational business. Its overall market share dipped. Provinces, which warehouse the cannabis producers’ product before it goes to dispensaries, are cutting back on inventory.

Stifel estimated that from April through June, Tilray was Canada’s retail market share leader, with control of 12.5% of it. Canopy was second, with 11.6%.

As Canopy scales back, celebrity collaborations with Seth Rogen and Drake — deals struck when the company’s previous leadership’s expansion was in high gear — have also fallen by the wayside.

“Canopy has dual Canadian headwinds, as market share weakness and inventory reductions by provincial boards look like a bigger drag than we had anticipated,” Piper Sandler analyst Michael Lavery said in a research note last month.

Competition in Canada has been intense, with the entry of new producers weighing on growth and weed prices for any one company.

Tilray, when it reported earnings last week, said store restrictions in Ontario, Alberta and British Columbia during the quarter confined many customers to online purchases.

Online, management said, customers bought weed based on price rather than other characteristics. Tilray CEO Irwin Simon said preferences would move away from pricing as the economy reopens.


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