Is Canopy Growth the Only Cannabis Stock Worth Buying?
Earnings season may be winding down for most stocks but for the Canadian cannabis sector it’s only just heating up. On June 20, Canopy Growth will be the first of the cannabis stocks to announce Q4 earnings. As of April of this year, the company became the world’s largest cannabis company and for this reason alone, the entire industry will be closely eyeing its numbers.
The past two years have seen an explosive bull market in cannabis stocks. It’s been the closest thing to crypto-like returns that traditional markets have seen in a long time. In October of 2018 marijuana was declared legal for recreational use in Canada and in the two or so years before it was made official, money began to flood into any stock that was even tangentially related to the green herb. To put the growth in context, Canopy Growth has gone from its 2017 low of just over $5 per share to a 2018 high of over $59 per share. That’s 1000% increase in a year and a half!
Dubbed as the first cannabis unicorn when it became the first company of its kind to achieve a valuation north of $1bln, Canopy Growth Corporation was also the first regulated, licensed and publicly traded cannabis producer in North America. It is currently traded on both the Toronto Stock Exchange and the NYSE.
Analysts are expecting revenues of just over $90mln (Canadian dollars), up from $83mln in Q3 and a loss per share of around 23 cents, from 22 cents in Q3. However, due to it being such a new sector, the traditional metrics probably won’t be the first things that investors are looking at. Investors will likely be looking past the EPS and revenue figures and focusing more on whether the firm’s production capacity is increasing and its operating expenses are decreasing. Q3 saw the company’s earnings quadrupling, but that was largely down to the fact that Q3 was the first quarter that the company was legally allowed to sell recreational marijuana.
The chart looks good too. The huge retracement we saw after the peak in late-2018 bottomed-out at around $25 per share in December and had doubled by April. The stock is currently trading at around $43 per share. Could another leg up be in store? Be sure to mark June 20 on your economic calendars!
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