CGC stock is witnessing its biggest one-day fall in 2019 after Canopy Growth (TSX:WEED) (NYSE:CGC) reported increased losses and revenue that missed the lowest analyst estimate in its Q2 2020 financial results.
Another Setback for the Industry
It is now a well-established fact that the cannabis industry is in a bit of trouble, and through the course of 2019, most of the companies in the sector have seen their businesses suffer. Some of the biggest companies in the industry have suffered during this period, and Canopy Growth is no exception.
Today, the company released its financial results for its fiscal 2020 Q2, and it has proven to be a massive disappointment for investors. The losses deepened further amidst spiraling expenses, and in addition to that, the company also made a major operational announcement.
In the second quarter, the company recorded an adjusted core loss to the tune of $155.75 CAD million, which is way over what analysts had expected. Analysts had estimated losses of $92.9 CAD million. The reason behind this substantial loss, according to Canopy, is the staggering 48.2% rise in operating expenses.
It goes without saying that these numbers are disappointing, and it was no surprise when CGC stock slumped 17% to $15.36 USD after hitting an almost 2-year low of $15.19.
Loss per share stood at $0.96 CAD as opposed to analysts’ estimates of $0.40 CAD a share. Revenue in the quarter almost trebled and hit $76.6 CAD million for the quarter.
The cannabis industry has suffered due to oversupply and also due to a decline in demand for marijuana in Canada. Hence, Canopy Growth, which is one of the biggest companies in the industry, announced today that it is going to stall expansion plans in Canada for the time being.
The CEO of the company, Mark Zekulin, said, “The last two quarters have been challenging for the Canadian cannabis sector as provinces have reduced purchases to lower inventory levels, retail store openings have fallen short of expectations, and Cannabis 2.0 products are yet to come to market.”
Many of the marijuana companies in Canada have spent heavily over the past year in order to boost their production capabilities, but the weak demand has certainly come as a crushing blow.
CGC stock has slumped 45% so far in 2019.
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