Canopy slips another 3% on margin concerns

|About: Canopy Growth Corporation (CGC)|By:, SA News Editor

Cannabis producer Canopy Growth (CGC -2.8%) slips on average volume. Shares have retreated almost 11% since Friday when it released fiscal 2019 results (year ended 3/31/19).

Sales were up 191% to C$226.3M but investors appear disappointed with other fundamentals.

Cowen's Vivien Azer (Outperform/C$82) is "not worried" about the sequential declines in its recreational, medical and international segments (Q4 sales of C$60M was larger than the next five competitors combined) but is concerned with the third consecutive fiscal year of gross margin erosion.

BMO's Tamy Chen (Market Perform/C$60 from C$65) believes gross margin will improve in the coming quarters but is less confident with the potential revenue contribution from edibles and vapes and the company's ability to hit its C$1B run-rate guidance by the end of fiscal 2020, adding that operating expenses required to ramp manufacturing and processing could be higher than planned.

Related tickers: Tilray (TLRY -4.4%), Aurora Cannabis (ACB -1%), Cronos Group (CRON -3.3%)


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