Latest Cannabis Earnings Fail to Impress

Cannabis stocks

Cannabis stocks across the board fell on Wednesday after several companies released their Q1 financial results. Unfortunately, most of these fell short of expectations and failed to impress investors as the majority of cannabis companies on the public markets fell today.

Acreage Holdings (CNSX: ARCG.F) saw its shares fall 4.8 percent after reporting on late Tuesday it’s financial results. While revenues had increased substantially, from $2.2 million to $12.9 million, the fact that first-quarter losses grew from $4.2 million last year to $31.2 now has struck a nerve with investors.

While company shareholders passed a preliminary vote regarding Canopy Growth Corp’s (TSE: WEED)(NYSE: CGC) acquisition offer, this wasn’t a surprise and did little to buoy falling stock prices.

By now, many expect cannabis companies to be seeing some sort of a profit by now, rather than just boast strong growth figures. While IPO markets have been willing to forgive tech giants going public for lacking any profits, the same can’t be said for cannabis companies apparently.

Another major loser in the cannabis sector was Charlotte’s Web Holdings (CNSX: CWEB), which fell by just under 5 percent in today’s trading session. The company reported smaller profit figures for Q1 2019 than it did a year ago in 2018. Overall, they reported $2.3 million, rather than last year’s $3.1 million.

This came as a major disappointment for the markets, which were expecting profits to at least stay the same if not grow slightly. Despite the fact that revenue rose from $13.1 million to $21.7 million, this wasn’t all that of an impressive increase, as many cannabis companies have seen their revenues triple or quadruple, and here Charlotte’s Web’s revenue hasn’t even doubled over the course of a year.

Valens GroWorks Corp (CNSX: VGW) also fell by 5.4 percent today, seemingly more due to the overall decline in the sector rather than any particular announcement on its end. Just yesterday the company announced a major extraction agreement with Tantalus Labs, riding on the back of an earlier agreement made with Hexo Corp (TSE: HEXO). Regardless, it was still one of today’s biggest losers in the cannabis space.

Major companies like Aurora Cannabis (TSE: ACB)(NYSE: ACB), Cronos Group (TSE: CRON)(NASDAQ: CRON), and Aphria (TSE: APHA)(NYSE: APHA) were all down 3.1 percent, 4.6 percent, and 3.9 percent respectively. The Horizons Marijuana Life Sciences ETF, one of the main benchmarks for the sector, was down roughly 2.5 percent today.

It appears that executives and management teams have somewhat failed to recognize a shift in investor attitudes around cannabis stocks. While they may have indeed valued growth figures above all else in earlier years, now that marijuana has become mainstream, these same investors are now expecting cannabis businesses to operate like any normal business does; profitably.

As 2019 progresses, this period of exponential growth will slowly die down as companies settle down a bit or get gobbled up in an acquisition offer. By the end of the year, the remaining cannabis companies on the market will likely be reporting far more profits than they did earlier this year, especially since much of their losses came from one-time expenses.