What happened
Marijuana stocks are recovering today. At 11:25 am EST on Tuesday, Canopy growth (NASDAQ: CGC) had a strong 10.1% increase, and marijuana rivals Aurora Cannabis (NYSE: ACB) and HEXO (NYSE: HEXO) were doing even better, each with an 11.4% increase.
And the reason all these stocks are doing well is Canopy itself.
Image source: Getty Images.
And
This morning, Canopy Growth announced its earnings for the fiscal third quarter of 2021, claiming record revenue of $ 153 million ($ 120 million), an increase of 23% year-over-year, and forecasting it will begin turning revenue into profit. in the second half of fiscal 2022. Working with Canopy’s somewhat accelerated financial calendar, this implies that the company is only a year away from profitability. Canopy says he sees potential for cannabis reform in the United States that will help her achieve that goal.
Implicit in this profit promise a year from now is the admission that Canopy Growth is not yet profitable today. The company’s gross profit margins plunged 15 full percentage points in the third quarter of 2021, compared to the prior year period, falling by only 16%. Net losses increased by more than 600%, to $ 829 million.
And Canopy burned $ 135 million in negative free cash flow.
What now
Despite all the negative figures, Canopy Growth expressed optimism about the future in the medium term. He predicted that, with the help of an opening in the US market, he will accelerate his revenue growth from the 23% pace set in the third quarter, to growth rates of 40% to 50% from fiscal 2022 through fiscal year 2024.
The company also predicted that it will achieve positive adjusted EBITDA in the second fiscal half of 2022, positive operating cash flow at the end of fiscal year 2023 and positive free cash flow in fiscal year 2024.
All of this news is specific to Canopy, so its qualified promise of profitability in one year does not mean that Aurora Cannabis and HEXO will also become profitable with it. That said, Canopy set the stage for Aurora’s own earnings report, due in the next few days, and the HEXO report, probably in late March.
Investors bidding for these stocks today expect the news they have to report to be at least as good as the news Canopy just released – and hopefully even better.