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What to Expect from Marijuana Giant Canopy Growth's (CGC) Q4 Earnings

Zachary Stutler

Ontario-based Canopy Growth Corp CGC is, as of April 2019, the largest cannabis company in the world based on its market cap of $14.6 billion. The company began selling cannabis for recreational use in Canada when it was legalized in October 2018. Before that, it sold marijuana for medical purposes. Canopy also has multiple subsidiaries and partners throughout the world and sells medical use-marijuana in multiple other countries. Canopy also has a license from New York State to process and produce hemp in the U.S.

Canopy’s stock is up 58% YTD, but all of this growth came in the first month of the year and the stock has struggled to maintain the levels it hit earlier this year. Canopy’s stock, similar to the stocks of other big cannabis companies such a Cronos CRON and Aurora Cannabis ACB, had a rough past 3 months, losing 8%.

New Acquisition

It’s an important couple of days for Canopy Growth. On Wednesday, both Canopy and Acreage Holdings Inc. shareholders will vote on whether or not Canopy can buy Acreage. If half of Canopy shareholders agree and two-thirds of Acreage shareholders agree, Canopy would have the rights to purchase Acreage as soon as cannabis is federally legalized in the U.S. If the deal were to be approved, Acreage would receive $300 million and shareholders would receive 0.5818 Canopy common shares per Acreage subordinate voting share held.

As of the time this article was published, no news had come out regarding the results of the vote.

Expectations

Canopy is also set to release its Q4 and fiscal year earnings for the quarter and year ended March 2019 on Thursday. Zacks Consensus Estimates call for Q4 revenue of $71.06 million, which represents year over year growth of 293.66%.

Although quarterly revenue is expected to grow substantially, Q4 EPS is expected to be -0.17, a 70% decline. Additionally, fiscal year 2019 earnings is expected to be down 237.50%. It is important to note that although these numbers look bad, they are the expectations. So, if the company were to beat expectations, even if it still were to not have positive earnings, its stock could receive a boost.

The earnings report may also provide guidance as to the expectations for fiscal year 2020 and Q1. Current Zacks Consensus Estimates call for Q1 year over year earnings growth to surge 45% on the back of 346% top line growth. Looking even further, fiscal 2020 estimates predict Canopy will have 58% earnings growth and 213% revenue growth on top of the fiscal 2019 estimates. But of course, these estimates are likely to change based on the firm’s actual Q4 results and guidance.

Bottom Line

All these estimates have been made without the federal legalization of marijuana in the U.S.

With that said, we are still likely a long way away from federal legalization—if it ever happens. But if it were to happen, Canopy seems set to profit.  Its earnings report tomorrow after the bell will provide a lot of information and could have significant impact on analysts’ outlook for the company, especially since the company is yet to report positive earnings and it may still be some time from reaching that point.

Eleven states and Washington, DC, have now legalized marijuana for recreational use for adults over 21. And 33 states have legalized medical marijuana.

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Cronos Group Inc. (CRON) : Free Stock Analysis Report
 
Aurora Cannabis Inc. (ACB) : Free Stock Analysis Report
 
Canopy Growth Corporation (CGC) : Free Stock Analysis Report
 
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