Major cannabis companies are doing all they can to curb losses and get their balance sheets under control. In many cases, this includes major layoffs as well as significant goodwill adjustments to their balance sheets. One of these companies is Canopy Growth (NYSE: CGC), which announced on Thursday that it had decided to shut down two of its major cannabis greenhouses as well as laying off hundreds of former employees.
Describing a process referred to as “production optimization” according to an official press release, Canopy Growth stated that it would be shutting down two greenhouses in British Columbia due to the overabundance of cannabis on the market. This is a common problem for major producers, which have seen their inventory levels surge over the past year as many companies have trouble finding buyers to sell their product to. Canopy Growth also said that it would be scrapping previous plans to open a third greenhouse in Ontario.
“When I joined Canopy Growth earlier this year, I committed to focusing the business and aligning its resources to meet the needs of our consumers,” said Canopy Growth’s CEO, David Klein. “Today’s decision moves us in this direction, and although the decision to close these facilities was not taken lightly, we know this is a necessary step to ensure that we maintain our leadership position for the long-term. Along with the rest of the management team, I want to sincerely thank the members of the team affected by this decision for their work and commitment to building Canopy Growth.”
While this would normally be bad news, investors were actually happy that the cannabis giant is moving to cut costs, especially since many analysts think that Canopy has too many greenhouses and other redundant facilities. This is even truer considering that there’s an overabundance of cannabis production among the big producers in Canada. Shares of Canopy were up 2.5% over the course of the day, a slight move upwards that could also be due to the significant gains seen from the Dow Jones, S&P 500, Nasdaq, and other indexes on Wednesday.
Most analysts covering the stock have scaled back their predictions for Canopy, with many previously bullish experts now remaining neutral or even bearish about the company. While there are still nine or so Wall Street analysts that have a “buy” rating on the stock, this could very well be due to the fact that Canopy has lost the vast majority of its market cap, making it a cheaper buy. In comparison, there are 12 analysts who have a neutral “hold” rating. Time will tell whether Canopy will end up recovering in 2020.
Canopy Growth Company Profile
Canopy Growth, headquartered in Smiths Falls, Canada, cultivates and sells medicinal and recreational cannabis, and hemp, through a portfolio of brands that include Tweed, Spectrum Therapeutics, and CraftGrow. Although it primarily operates in Canada, Canopy has distribution and production licenses in more than a dozen countries to drive expansion in global medical cannabis and also holds an option to acquire Acreage Holdings upon U.S. federal cannabis legalization. – Warrior Trading News
