Canopy Growth spikes 22% after beating earnings expectations, and now other pot stocks are surging as well

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Canopy Growth

Pot stocks are flying high Friday after Canopy Growth Corp.’s fiscal third quarter 2020 earnings report beat Wall Street expectations.

Shares of Canopy Growth surged as much as 22% Friday following the company’s better-than-expected earnings report for the quarter ended December 31. The Canadian Canopy Growth is the largest cannabis company in the world by market value.

Here are the main numbers in Canadian dollars:

  • Adjusted Ebitda loss: C$91.7 million reported, versus C$110 million (expected)
  • Adjusted loss per share: C$0.35 reported, versus C$0.45 (expected)
  • Revenue: C$123.8 million reported, versus C$105.4 million (expected)

Canopy Growth’s revenue surged 62% from the previous quarter, and cannabis gross revenue rose 8%. The company also took measures in the third quarter to cut its operating expenses and boost gross margin to 34%, up from negative 13% one quarter earlier.

“In Q3 we executed across Canada, in our international markets and in our strategic acquisitions to drive revenue growth,” Canopy’s new CEO David Klein said in a press release. “We have a lot of work to do. We are eager to capitalize on the opportunity to create an unassailable position through a tight focus on the consumer and on critical markets.”

In the third quarter, Canopy Growth maintained its leading 22% market share in retail, and continued to see gains in the number of patients in the Canadian medical cannabis market, the company said.

The company delivered “significant” gross improvement in the quarter, driven by stronger revenues and higher capacity utilization, according to Chief Financial Officer Mike Lee.

“Actions taken earlier this year are expected to meaningfully reduce stock-based compensation in FY21, and we have started to implement tighter cost controls across the organization,” Lee said, adding, “we plan to take further steps to reduce our costs and right-size our business to ensure that we can generate a healthy margin profile and cash generation in the coming years.”

Rival pot stocks surged following Canopy’s solid report, which was a stark contrast to Aurora Cannabis’ earnings release Thursday after the bell, when the company reported a nearly $1 billion loss. The gains sent the Horizons Marijuana Life Sciences Index ETF as much as 8% higher Friday.

Here’s how much each cannabis company stock gained Friday:

Canopy Growth has shed about 7% year-to-date through Thursday’s close.

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Markets Insider