• Ted Ohashi

Constellation investment changes outlook for Canopy Growth

Canopy Growth reported first quarter results for the three months ended June 2018.

  • Sales were $25.9 million, an increase of 63% over the first quarter of 2017.

  • 2,695 kilograms and kilogram equivalents sold in the first quarter ended June 30, 2018, representing an increase of 47% over the first quarter of last year.

  • Oil sales, including softgel capsules, accounted for 26% of first quarter product revenue.

  • Average selling price per gram was $8.94 for the first quarter, as compared to $7.96 last year in the same quarter.

  • Adjusted EBITDA in the first quarter fiscal 2019 amounted to a loss of $22.5 million compared to a loss of $3.9 million in the same period last year.

  • After taxes and other expenses of $60.4 million produced a reported net loss of $90.8 million or $0.40 per basic and diluted share compared to a net loss of $9.2 million or $0.06 per basic and diluted share in the comparative period last year (read full quarterly report here).

These results were obviously overshadowed by Constellation investment news. On the one hand, it was a good thing because taken on their own, these financials would have likely resulted in a significant decline in Canopy’s share price and for the cannabis stocks in general.

On the other hand, the Constellation investment changes the entire investment landscape for Canopy, in our opinion. Canopy’s sales and income will remain important but it will now take a backseat to how and where the $5 billion is invested. Canopy appears to be looking at a window of opportunity that will allow Canopy to be a factor in all 29 companies Linton identified as following Canada’s model into cannabis legalization. It might well be that it is more important at this time to have first mover advantage into the world market before big pharma and big beverage companies step in to compete than it is to operate at a profit.

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