Canopy Growth down 18% as realism with cannabis market builds

  • Canopy Growth (CGC -17.7%), considered by many as the leader in the overhyped cannabis sector, slumps on almost double normal volume after its fiscal Q2 report released this morning that represented yet another example of investors' unrealistic near-term valuation views.
  • Net revenue was C$76.6M, up 229% from a year ago but down 15% from the previous quarter, a clear sign of headwinds principally due to too many producers who have ramped up capacity chasing too few customers.
  • Operating expenses continued to climb, up 48% from a year ago and up 15% sequentially. Non-GAAP EBITDA was solidly negative (C$155.7M) as was cash flow ops.
  • Inventory was C$461.8M, up 17% from Q1, another signal, albeit preliminary, of a backup in demand.
  • Cannabis oil and softgel sales were down 80% from Q1.
  • Related tickers: Aurora Cannabis (ACB -12.1%), Cronos Group (CRON -6.6%), Tilray (TLRY -4.4%), Aphria (APHA -8.1%), Horizons Marijuana Life Sciences Index ETF (HMLSF -5.4%)
  • Previously: Canopy Growth EPS misses by C$0.73, misses on revenue (Nov. 14)

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