Pot Stocks Earnings Preview: Will Earnings Weigh On Stocks?


Canada is now the first industrialized nation to legalize recreational cannabis, while two-thirds of all states in the U.S. have given the go-ahead to medical marijuana in some capacity. In addition, the 2018 Farm Bill legalized commercial production of hemp and hemp-based cannabidiol products.

But despite all of this, pot stocks have lost ground occasionally as some market participants continue raising the alarm about the industry possibly being in bubble territory. The late summer pot rally last year was probably the biggest one to happen, but many pot stocks have since given away all the gains.

Investors have yet to see tangible results from the investments that cannabis companies have made so far. To this point, the companies have promised triple-digit annual sales growth with profits and huge peak production figures. But can they deliver?

Canopy Growth Corp (NYSE: CGC)

Canopy Growth, one of the largest publicly traded marijuana producer in Canada, is set to release its earnings report after the closing bell on Thursday. The company has already received its multi-billion-dollar investment from Constellation Brands (NYSE: STZ).

Analysts polled by FactSet expect the cannabis grower to report losses of $C0.17 per share and sales of C$84.7 million. Some investors are likely to head for the sidelines if the company reports a massive loss. When Canopy reported earnings in November, its shares fell into and out of the report. The stock has lost more than 9.6% since October 17, 2018, when recreational cannabis became legal in Canada.

Aphria Inc. (NYSE: APHA)

Shares of Aphria Inc., another marijuana grower based in Canada, have been in the red since short seller Gabriel Grego of Quintessential Capital Management published a report accusing the company of wasting hundreds of millions on worthless foreign acquisitions.

The company also recently declined an unsolicited takeover bid from rival Green Growth Brands. The CEO of Aphria, Mr. Chair Irwin Simon released a statement saying, “GGB offers shares in an illiquid company with limited operating history, minimal assets and no track record in the cannabis industry.”

The marijuana company reported its quarterly earnings on Jan 11. Shares jumped 5.3%, indicating that Wall Street saw the earnings report in a positive light. However, the stock has since lost the gains following Grego’s report and the hostile takeover bid from Green Growth.

Aurora Cannabis Inc. (NYSE: ACB)

Aurora Cannabis Inc. will report fiscal 2019 second-quarter financial results Monday after the close. The company is expected to report a loss of C$0.06 per share on sales of C$51.84 million. In the same period last year, the company posted a profit of C$0.20 per share on sales of C$11.7 million. Aurora anticipates sales to be in the range of C$50 million to C$55 million for the quarter.

Tilray Inc. (NASDAQ: TLRY)

Tilray Inc. reports fiscal fourth-quarter results on Tuesday and analysts expect it to report a loss of $0.18 per share on $12.4 million sales. The Nanaimo, British Columbia-based marijuana grower generates 79% and 19.3% of its revenue from dried cannabis products and cannabis extract products, respectively.

Tilray is currently working with Novartis-owned Sandoz to develop medical cannabis products in Canada. Shares of the company have taken a genuine thumping since Canada officially legalized recreational marijuana, going down about 40%.

Cronos Group Inc. (NASDAQ: CRON)

Cronos Group Inc., which is backed by tobacco giant Altria Group Inc. (NYSE: MO) has more than doubled this year. Altria took a massive $2.4 billion stake in the company in 2018. Shares of the Cronos are still up 93% on the year, driven by excitement about the multi-billion-dollar investment.

Cronos’s quarterly revenues have jumped nearly 100% in the past eight quarters. In fiscal 2016 fourth quarter, revenue was $0.4 million, compared with $3.8 million in 3Q2018. Analysts expect the company to report a jump in per-share-earnings this year, supported by positive revenue growth.