Employees work at the Canopy Growth facility in Smith Falls, Ontario, Canada, December 19, 2017.
Chris Roussakis | Bloomberg | Getty Images
Canopy Growth’s shares soared on Tuesday after the Canadian cannabis company said it expects to be profitable in the second half of 2022.
“We are building a winning record in our core markets, while accelerating our growth strategy in the U.S. with the momentum behind the promising cannabis reform in the U.S.,” said Canopy Growth CEO David Klein, in a statement on Tuesday.
Canopy shares closed on Tuesday, up 11.9% to $ 49.09. The shares gained about 149% last year, bringing their market value to more than $ 17.1 billion. On Tuesday’s trading, the stock rose to a 52-week high of $ 50.92.
Earlier, the company reported that its third quarter revenue increased 23% over the previous year, to $ 153 million Canadian dollars ($ 120 million), driven by higher sales of recreational products in Canada and medical marijuana in markets international standards.
Canopy’s loss increased to C $ 829 million (US $ 653 million), or C $ 2.43 per share, from a loss of C $ 109.6 million, or 26 cents per share, a year ago.
The company said it has been trying to improve its profitability by cutting costs and controlling expenses. These efforts, combined with expected increases in demand, should help it make a profit next year.
In the next 12 to 18 months, Canopy expects to reduce its costs by up to C $ 200 million.
With the new Biden administration, Canopy Growth is optimistic about the prospects for cannabis legalization in the U.S., saying it expects to enter the market this year.
“We anticipate that this legislation will include comprehensive reform to ensure restorative justice, protect public health and implement responsible taxation while ending the cannabis ban,” said Klein in a earnings call.
According to Owen Bennett, a stock analyst at the Jefferies Group, Canopy Growth continues to position itself as the leading cannabis company in the U.S. for short-term legislative reform, after obtaining ownership of Acreage and a stake in TerraAscend.
Bennett also cited his Martha Stewart CBD product line, which is already selling 94% of all U.S. CBD brands just four months after launch, as another factor. The brand recently added CBD pet products.
Canopy Growth has released its medium-term financial goals, estimating that compound annual revenue will increase between 40% and 50% from fiscal years 2022 to 2024. In addition, the company expects to achieve positive operating cash flow in fiscal year 2023 and a positive free cash flow for fiscal year 2024.