Sure, earnings season may have passed for the lion’s share of brand-name companies, but that doesn’t mean earnings reports cease altogether. Next week, the biggest name in all of cannabis, Canopy Growth (NYSE:CGC), will be dishing on its performance in the fourth quarter and full year of fiscal 2019.
According to a company press release, the largest pot stock in the world by market cap will be releasing its operating results after the closing bell on Thursday, June 20. Regardless of whether you currently own stock in Canopy, have considered buying in, or are simply invested in other pot stocks, Canopy Growth is an industry trendsetter, making its quarterly report a must-see for marijuana stock investors.
When Canopy Growth does lift the hood on its quarter, here are 10 numbers you’ll want to be focusing on.
1. Gross/net revenue
Though blatantly obvious, the first figure you’ll want to home in on is Canopy Growth’s gross and/or net revenue. Net revenue is simply gross revenue minus the excise tax paid by growers to the Canadian federal government.
Despite Canopy’s being a leader in quarterly revenue, and a top two producer in Canada, supply chain issues are expected to have seriously weighed on the company’s fiscal fourth-quarter results. Let’s keep in mind that cannabis store revenue in Canada actually declined month over month in January and February, which will make it very difficult for Canopy to substantially grow sequential quarterly sales. Per Wall Street’s consensus, gross revenue is expected to climb from the sequential third quarter by less than 4%.
2. Recreational sales as a percentage of total cannabis sales
Whereas Canopy’s primary rival, Aurora Cannabis (NYSE:ACB), has decided to focus its attention on the medical marijuana community (Aurora generates half its cannabis sales from medical pot), Canopy Growth’s initial quarter of recreational marijuana sales in the post-legalization environment in Canada showed that it’s angling for a good chunk of the adult-use consumer base. Of total pot revenue in Q3 2019, almost 80% was derived from the adult-use market. Then again, this shouldn’t be a surprise, given that the company has around 70,000 kilos of annual wholesale supply deals with Canada’s provinces.
Keep an eye on the ratio of recreational revenue to medical sales in Q4 to see if it’s shifted substantially from the sequential quarters’ roughly 80%-20% mix.
3. Average selling price per gram of dried flower
Supply-and-demand economics would suggest that if demand is outpacing supply, the price of a good or service should rise. Since the green flag began waving on recreational weed in Canada, supply has been challenged, although the per-gram price of dried flower has still declined for most growers, mostly because of the aforementioned excise tax on adult-use marijuana sales being factored into the per-gram price.
But Canopy Growth should be an interesting case. Likely having sold the most marijuana in the first quarter of calendar 2019, its average sales price per gram could tell an interesting story about supply-and-demand economics in the cannabis space. If the average selling price per gram does somehow rise, cannabis stocks could benefit big-time, once supply issues are pushed into the rearview mirror.
4. International sales
Investors would also be wise to keep a close eye on Canopy Growth’s international sales in the fiscal fourth quarter. With a production, export, distribution, or research presence in 17 countries, including Canada, Canopy Growth sits behind only Aurora Cannabis, which has a presence in 24 countries, as the most globally diverse cannabis company.
However, sales in foreign markets have yet to really take off, partly because the infrastructure needed to be successful is still being developed, and also because domestic demand in Canada isn’t even close to being satiated. Nevertheless, overseas sales channels are of long-term importance to Canopy, which means sales in international markets should be monitored closely in the fiscal fourth quarter…
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