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article imageMarijuana stocks plunge after Canopy Growth, Tilray report losses

By Karen Graham     Nov 14, 2018 in Business
Shares of two of Canada's top cannabis producers, Canopy Growth and Tilray, took a hit in early market trading on Wednesday after posting quarterly net losses.
U.S.-listed stocks of Canopy Growth (CGC), Aurora Cannabis (ACB) and Tilray (TLRY) are sinking. Aurora Cannabis Inc. shares jumped nearly 5 percent in pre-market trading on Monday after announced its financial and operational results for the first quarter ended September 30.
Today, Smiths Falls, Ontario-based Canopy Growth reported a loss of $330.6 million in its most recent quarter, and Tilray reported a quarterly net loss of US$18.7 million during the first quarter ending Sept. 30, compared to US$1.8 million in the third quarter of 2017,
Barron's is now reporting all three stocks are continuing to drop, an indication of the unknowns and variables still to be worked out in the Canadian recreational cannabis market.
Marijuana being grown in a greenhouse for Canopy Growth Corp in  Smith Falls  Ontario.
Marijuana being grown in a greenhouse for Canopy Growth Corp in Smith Falls, Ontario.
Canopy Growth Corp.
Aurora stock drops further
Aurora stock has slipped more than 15 percent to $6.15, while Nasdaq-listed Tilray stock is down 10 percent this morning to $105, despite an 86 percent rise in sales. NYSE-listed Canopy is down 10 percent to $34.58 on a September sales miss.
On Monday, Aurora announced it had generated $29.7 million in revenue, up 260 percent year-over-year in its first-quarter report, with earnings of $104.2 million, up 2,826 percent versus a year ago. However, that was after counting gains on investments; on its operations. Aurora lost $112 million and its free cash flow exceeded a negative $45 million. Like Canada’s other biggies, Aurora has no problem raising cash.
Canopy Growth breakdown
During the quarter reported, Canopy Growth sold 2,197 kilograms and kilogram equivalents at an average sale price of $9.87 per gram, up from 2,020 kilograms and kilogram equivalents at an average price of $7.99 a year ago. The company has 84,400 active registered medical marijuana patients, up from 63,000 a year ago.
Canopy Growth based its quarterly net loss on higher expenses as it spent more in the weeks before the legalization of recreational use of marijuana came about on October 17. Chief Executive Officer Bruce Linton blamed the shortfall on a slowdown in medical demand ahead of Canada’s recreational sales, and a slowdown in deliveries to Germany, according to Market Watch.
Linton said margins will improve from here. “Provinces are screaming, ‘Get me product,’” he said. “That craziness for the first 30 days is starting to become a predictable model.”
Constellation Brands  Inc.  took a 9.9-percent stake in Canopy Growth Corp for $245 million.
Constellation Brands, Inc. took a 9.9-percent stake in Canopy Growth Corp for $245 million.
Constellation Brands
Tilray buying on the wholesale market
Tilray hasn't been able to produce as much product as it sells, so it has resorted to buying marijuana on the wholesale market. “We kept hearing about all of this capacity that people were building out and when we went to buy some of that supply, it is not available,” said CEO Brendan Kennedy on last night’s conference call. “There is far less supply than, frankly, we expected.”
Kennedy also noted there was less good quality marijuana available on the wholesale market. And Kennedy says this having to buy from third-parties has greatly eaten into the company's profit margins. At the end of the quarter in September, gross margins went to 31percent from 55 percent in the same period last year. Longer term, said Kennedy, the company expects gross margins above 50 percent.
At least Tilray has money to spend. “We have over $500 million in cash to invest today," said Kennedy.
Performance as of times listed on November 14  2018.
Performance as of times listed on November 14, 2018.
Yahoo Finance
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