Canopy Growth caught in stock market turbulence

Canopy Growth announced on Wednesday that it recorded a net loss of $1.28 billion (€863 million) in the quarter ended June 30, compared with just $91 million in the same period of 2018. The company said these losses were due to the investments it had to make following the legalization of recreational cannabis in Canada last year. These efforts paid off, as Canopy generated net revenues of $90.5 million, up from $25.9 million last year.

However, following the announcement of these results on Wednesday, the share price fell by 17% on the stock market, to 35$, having already fallen by 39% over the past three months. These losses are much higher than those forecast by experts, which explains the sharp reaction of shareholders.

What's more, it would appear that Canopy has also lost its position as Canada's cannabis market leader, leading to a drop in its share price forecast from 65 to 45$ as explained by Marketwatch. «We are reducing our target as poor sales performance in the recreational cannabis market could indicate that Canopy has lost the leadership position.», he writes in a note. «However, we remain positive on WEED in the long term as we expect the company to be well prepared for cannabis 2.0,» understanding the arrival of edibles and concentrates next October.

Significant losses had already been the cause of the dismissal of historic company founder, Bruce Linton, at the beginning of July 2019. The company had in fact lost nearly $39 million, which had not gone down well with Bill Newlands, head of Constellation Brands and owner of 39% of shares of Canopy Growth. Mark Zekulin, previously co-CEO with Bruce Linton, had indicated that he would help find a replacement to take up the position with him. However, on the announcement of the financial results, he announced his resignation, which will take place as soon as Canopy has found someone else to take over the management of the company.