Cannabis companies have been having a hard time over the past year, but this pandemic has made this even worse. With companies seeing much of their revenue figures dwindle away due to lock downs and mandatory store closures, most retail-based cannabis companies are struggling, extending what was already a tough time for most businesses.
One of the largest cannabis companies in the world, Canopy Growth (NYSE: CGC), reported its second-quarter financial results just before the weekend. Unfortunately for the company, it ended up recording a $1 billion net loss, far worse than what many investors had feared.
Canopy Growth had previously expected to record a $800 million loss due to the various shutdowns of its Canadian facilities. Additionally, the company had laid off 500 jobs in an effort to trim down future costs. However, it ended up being much larger than expected, coming in at well over a billion for the quarter, raising fresh concerns about the companies financial situation.
“Through the COVID-19 pandemic we have worked hard to ensure the health and well-being of our teams and customers and the continuity of our business. During this time, our team has rolled out our exciting new cannabis-infused beverages and vape products in Canada and a portfolio of CBD products in the US,” said CEO David Klein in a press release, trying his best to make the best out of a poor situation. “True to key priorities that I have outlined for Canopy, we have taken steps to align our capacity with the current market demand and focus our resources against the core markets with the largest and most tangible near-term profit opportunity.”
Although Canopy is one of the better-funded pot stocks on the market right now, with billions in cash and short-term assets, it won’t last long if things don’t change for the company. Net revenues for the quarter came in at $399 million, which is still a substantial 76% improvement from Q2 2019. Additionally, store reopenings could see revenues surge even more in the third quarter.
Shares of Canopy Growth ended up plummeting an extra 21% on Friday in response to this news. Also, other cannabis companies have also seen their shares plummet by association. The much-maligned Aurora Cannabis (NYSE: ACB) saw its stock decline by around 9% as well on Friday. Few pot stocks have emerged unscathed during this pandemic, with many investors worried that some of the biggest names in the industry could be going bankrupt soon. While Canopy Growth has always been one of the best-funded cannabis companies in the market, even its large cash balance could run out quite quickly in the near future.
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