The Green Organic Dutchman (TSX:TGOD) (OTCQX:TGODF) released its Q2 earnings recently, and now TGOD stock is down more than 15.5%. What went wrong? Let's find out.
The Results
Despite TGOD stock enjoying a slight surge last week after the company announced it has applied to list on the NASDAQ, yesterday's Q2 earnings results did little to reinforce speculators' optimistic sentiment. The company posted Q2 revenue of $2.9 million CAD, which is a 20% increase from Q1. This revenue was primarily driven by the company's launch of its "Growers Circle" pilot initiative, which saw sales to a small number of medicinal cannabis patients to test the company's distribution capabilities.
However, the sticking point for investors this morning was the company's net loss of $16.4 million CAD, which is up from $9 million CAD for the same period last year and represents a loss of six cents per share. These losses were mostly incurred by an increase in expenditure on the company's production facilities. TGOD announced it is nearing completion of its Hamilton site and phase one of its Valleyfield site, which will see the company's production capacity rise by more than 200,000 kilograms.
While the company states that these costs were incurred in line with management's commitment to maintaining a disciplined approach to operational costs, investors were clearly underwhelmed as reflected by TGOD shares' tanking value this morning.
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What Does This Mean for TGOD Stock Going Forward?
While TGOD stock may be sinking off the back of this announcement, there is still cause to be hopeful for investors in Canada's largest producer of organic cannabis. The company reaffirmed its commitment to producing cannabis via a process that is completely free of synthetic fertilizers and pesticides. TGOD remains confident that the conscientious customer will be willing to pay a premium for guaranteed organic cannabis.
Today's announcement also included news of several supply and distribution agreements, which could signal a big future for TGOD stock. These agreements included a supply deal with the provincial boards Alberta Cannabis and BC Cannabis stores, which will increase the company's presence in Western Canada. In addition, the firm signed a distribution agreement with Mediakos UG haftunsbeschraenkt to be the exclusive distributor of CannibiGold, HemPoland's premium hemp CBD brand, for the German pharmacy market.
The Takeaway
While today's announcement didn't do wonders for TGOD stock, analysts still believe the company has serious revenue-generating potential. TGOD does not have any substantial debt to worry about, and some experts believe that the TGOD shares could increase by as much as 160% when TGOD aligns with its fundamentals. Added to this, the arrival of the second wave of cannabis legislation arriving in October, perhaps now is as good a time as ever to get in on TGOD stock.
What do you think?
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