|Bid||0.00 x 0|
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|Day's Range||16.50 - 19.10|
|52 Week Range||12.50 - 46.50|
|Beta (3Y Monthly)||N/A|
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Marijuana stocks surged Thursday on promising regulatory develops in the U.S. and Canada to give one major weed ETF its best day of 2019.
Cannabis stocks rallied across the board Thursday, as investors returned to the beaten-down-sector with a fresh enthusiasm, following a historic House vote in favor of a bill that would lift the federal ban on weed.
(Bloomberg) -- An eight-month rout in pot stocks that wiped out almost two-thirds of their market value may finally have reached its bottom.A Bloomberg index tracking cannabis companies was on track toward its biggest three-day advance since the beginning of the year after six sessions of heavy losses. Among those leading gains Thursday were Canopy Growth Corp., Aurora Cannabis Inc. and Cronos Group Inc., all of which rallied more than 13%.Pot stocks hit a “floor” after Canada’s four largest companies all missed earnings estimates last week, said Neil Selfe, founder and CEO of Toronto-based investment bank Infor Financial Group Inc.“I think the crescendo of negative news came to its peak on Friday, and I can see these stocks rebounding from their lows,” he said. “I don’t think we get anywhere back to the highs, but we could see a 20% bounce from here off the lows among the Tier 1 players.”The rebound is being driven in part by investors unwinding bearish bets in stocks such as Tilray Inc., whose short interest amounts to 37% of the shares available for trading. Gains in the 20 most-shorted pot stocks cost bears $272 million as of mid-afternoon on Wednesday, according to data from financial analytics firm S3 Partners.Signs that the problems weighing on Canada’s pot giants haven’t crossed the border also are aiding the bounce-back. U.S. operators including Trulieve Cannabis Corp., Curaleaf Holdings Inc. and Green Thumb Industries Inc. have all reported strong quarterly results.“We’ve been table-pounding about the U.S. companies for the last six months and it felt like people weren’t paying attention,” said Charles Taerk, CEO of Faircourt Asset Management, which acts as an adviser to the cannabis-focused Ninepoint Alternative Health Fund. “I think to a large degree investors still think of the cannabis sector as one homogeneous group and they’re not.”However, pot stocks have a long way to go before they get anywhere near the highs they reached in the spring. As a stark illustration of how much value has been lost in the sector, Canopy’s market value reached a high of C$24 billion in April. Today, the 25 largest Canadian pot companies are worth about C$24 billion combined.And while things may be looking brighter for the industry, the problems facing some of its biggest companies haven’t gone away, Taerk said.“A week ago we had some of the major Canadian LPs significantly disappoint on both quarter-over-quarter revenue and from a cash-flow perspective,” he said. “Those issues are going to continue. Those are still realities.”To contact the reporter on this story: Kristine Owram in New York at firstname.lastname@example.orgTo contact the editors responsible for this story: Brad Olesen at email@example.com, Richard Richtmyer, Steven FrommFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Canopy Growth shares moved extended their rally following a House Judiciary Committee vote to decriminalize marijuana on a federal level.
U.S. operators have been reporting strong September numbers this week, after better-known Canadian ones like Canopy Growth and Aurora Cannabis saw ugly negative cash flows.
Cannabis market leader Canopy Growth Corp. said Thursday it is aware of yet-to-be certified securities class-action suits that have been filed in the U.S. alleging the Canadian company made false and misleading statements, and intends to vigorously defend itself. "The company believes it has conducted itself in accordance with all relevant securities laws, and that the claims are without merit," Canopy said in a statement. It did not offer further details. Law firm Pomerantz LLP said Wednesday it was investigating claims on behalf of Canopy investors relating to concerns about the company and certain of its officers and/or directors regarding possible securities fraud and other unlawful business practices. Canopy's second-quarter earnings released Nov. 14 reported revenue that was below analyst estimates and an EBITDA loss of C$155.7 million ($116.9 million). One analyst described the numbers as "astounding," said Pomerantz. The company further warned that it was unlikely to meet revenue guidance for the fourth quarter, pushing its stock sharply lower. The cannabis sector has been slammed for several months as the Canadian legal market is developing far more slowly than expected and companies are still struggling to sell cannabis and make money. Canopy shares have fallen 34% in 2019, while the ETFMG Alternative Harvest ETF has fallen 31% and the S&P 500 has gained 24%.
Bank of America Merrill Lynch analysts upgraded their rating back to Buy from Neutral in a research note early Wednesday morning.
Following a week when Canada’s well-known pot producers reported big losses on the September quarter, their American counterparts are showing how it’s done.
Neptune Wellness Solutions Inc. said Wednesday it has reached a mutual agreement with Canopy Growth Corp.s to amend and restate their cannabis processing agreement. The parties have agreed to an amended schedule of processing volumes committed to Neptune by Canopy and to the removal of certain preferential rights granted Canopy related to Neptune's capacity and pricing. "Effective June 30, 2020, volume and pricing will be negotiated between the two parties based on market conditions," Neptune said in a statement. The 3-year term of the deal remains intact. "As a result of the revised terms, Neptune expects to reduce its client concentration risk and diversify its customer base," said the statement. Neptune shares were up 2.2% premarket. Canopy was up 6.4%, but remains down 43% in 2019, while the ETFMG Alternative Harvest ETF has fallen 33% and the S&P 500 has gained 24.5%.
Investing.com – Canopy Growth has plunged in recent months to levels that finally make it worth buying, Bank of America said on Wednesday, sending shares of the Canadian cannabis producer sharply higher.
Cannabis stocks rose Tuesday and were on track to end a six-day losing streak, buoyed by news that a congressional committee is advancing a bill that would lift the federal ban on cannabis and overturn past convictions.
If you want to know who really controls Canopy Growth Corporation (TSE:WEED), then you'll have to look at the makeup...
(Bloomberg) -- Marijuana stocks took another leg down on Monday, after the Washington Post reported that former vice president Joe Biden said that weed may be a “gateway drug” that can lead users to harsher substances, a sign one of the leading Democratic challengers to President Donald Trump may be at odds with much of his party when it comes to pot.Pot stocks including Canopy Growth Corp., Aurora Cannabis Inc., Cronos Group Inc. and ETFMG Alternative Harvest ETF underperformed Monday, extending a recent slump that has plagued the sector following a brutal earnings season. Aurora was the biggest decliner in the S&P/TSX Capped Health Care Sector Index, down 13%, while cannabis peer Aphria fell 9%.Biden’s comments come at an awkward time, two days before the House Judiciary Committee markup of H.R. 3884, which would decriminalize marijuana at the federal level and reassess pot convictions.Cowen’s policy analyst Jaret Seiberg thinks the timing of the markup seems odd as it will be overshadowed by impeachment proceedings and the Thanksgiving recess. “This may be a wasted chance to pressure the Senate on the SAFE Banking Act,” he wrote.The SAFE Banking Act bill would , if enacted, expand the ability of banks to provide financial services to cannabis businesses and service providers and grant a safe harbor to U.S. entities serving the hemp industry.The House committee’s decision earlier Monday announcing a markup of the Marijuana Opportunity Reinvestment and Expungement (MORE) Act was lauded by one of its strongest supporters. “This will be one of the most historic events in our movement,” said Congressman Earl Blumenauer (D-Ore.), the founder and co-chair of the Congressional Cannabis Caucus.Jefferies analyst Owen Bennett added that the legislation, sponsored by House Judiciary Committee Chairman Jerrold Nadler, would remove cannabis from the Controlled Substances Act. Meanwhile, the MORE Act would also provide for re-sentencing and expungement of records for people previously convicted of cannabis offenses. He noted that it currently has 55 cosponsors, all but one of whom are Democrats.Seiberg thinks the vote will be a disappointment from “tactical point of view.” However, it’s not all doom and gloom, as “it shows how much views on Capitol Hill have changed on cannabis and supports our argument that federal legalization is inevitable,” he added.\--With assistance from Erik Wasson.To contact the reporter on this story: Aoyon Ashraf in Toronto at firstname.lastname@example.orgTo contact the editors responsible for this story: Brad Olesen at email@example.com, Scott SchnipperFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Wall Street’s exuberance over legal weed has quickly curdled into sober reality.In a matter of months, white-hot cannabis companies have flamed out in spectacular fashion. Many have lost two-thirds or more of their value.Widespread legalization has been thwarted. Bank financing has dried up. Deep-pocketed institutional investors remain on the sidelines and old-fashioned black-market dealers still provide stiff competition.The pain deepened on Thursday, when Ontario-based Canopy Growth Corp. announced revenue that fell short of the lowest Wall Street estimate and a loss that one analyst called “astounding.” That sent shares to the lowest since December 2017. It’s still the largest pot company in the world, but at C$7.1 billion its market value is just a sliver of the C$24 billion it reached in April.One day later, MedMen Enterprises Inc., one of the first U.S. cannabis companies to sell shares to the public, said it would dismiss 190 employees, including about 20% of its corporate workforce, as it struggles to preserve a dwindling cash pile.“The last industry chapter was defined by growth at all costs,” MedMen Chief Executive Officer Adam Bierman said in an interview. “Now we’re transitioning out of that chapter, and that transition is harsh and quick.”Legal WeedIt wasn’t that long ago that the cannabis industry was cruising. Big markets like Canada and California had legalized recreational use, while populous states such as New York and New Jersey were expected to follow suit. This had executives and analysts forecasting sales in the tens of billions of dollars within a few years, sending stocks to valuations that even some in the industry warned were too high.But legalization hasn’t been the trigger to invest that many expected. Canada’s biggest provinces have allowed few retail stores to open, while companies have struggled to develop the right mix of products. In California, the legal market has had to contend with high taxes and a well-established illicit market. Legalization efforts in other states have stalled.Despite the obstacles, many remain optimistic that bullish benchmarks will be reached, though later than expected. Cowen Inc. analyst Vivien Azer recently boosted her U.S. sales outlook to $85 billion by 2030 from a previous forecast of $80 billion, while Canopy has said it’s still on track to turn a profit in three to five years.For the first time, with stocks at such low levels, “there’s incredible pockets of value in the space,” said Justin Ort, chief investment officer for the Measure 8 Full Spectrum Fund, which invests in cannabis. “But the Street’s not willing to see it right now.”What would get share buyers’ attention, Ort said, is legislative easing in the U.S., including passage of the SAFE Banking Act, which would pave the way for financial institutions to do business with cannabis companies and bring large institutional investors and U.S. capital markets into the fold.Patient InvestorsBut cannabis remains federally illegal in the U.S., meaning that shares are largely held by retail investors, who are less likely than institutional investors to remain patient in a downturn.“In almost every other industry, people can make relative-value judgments,” Jeff Solomon, CEO of Cowen, said at his firm’s cannabis conference in Boston last week. “In this industry they’re like, ‘Well, it’s not really a matter of price, it’s a matter of whether or not I should even get involved.’”That’s raised fears that many companies will go bankrupt before financing becomes available. It’s already happening to DionyMed Brands Inc., which filed for receivership last month.“The capital markets have gone from frothy to completely closed,” MedMen’s Bierman said. “We’re now entering a stage where businesses are going to have to be self-sustaining.”To contact the reporter on this story: Kristine Owram in New York at firstname.lastname@example.orgTo contact the editors responsible for this story: Brad Olesen at email@example.com, Bob Ivry, Stephen MerelmanFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
As if pot stocks didn't suffer enough pain already, this week they took a massive beating. Canopy Growth (NYSE:CGC) fell 15% just yesterday. Wall Street sold CGC stock in droves as they hated the earnings report. It's down another 2% today in sympathy to the earnings drop Aurora Cannabis (NYSE:ACB) suffered. Year to date, the stock is down 50%, while the S&P 500 is up 25% and at all-time highs.Source: Shutterstock Today's write up is to caution against catching the falling knife in Canopy Growth stock and all the cannabis stock cohort without careful consideration.These may turn out to be falling machetes with tiny handles. And the brave bulls here could end up missing digits.InvestorPlace - Stock Market News, Stock Advice & Trading TipsBut for CGC, there could be some relief near $14 per share. The next significant level below it is $10.50 per share.The gloomy warning is is nothing against the specifics of CGC, but the segment also has massive challenges, none greater than the regulatory environment. Yes, the legalization of cannabis on some of the state levels were tremendous steps forward, but it is still illegal in the eyes of the federal government. So pot companies will continue to face this headwind for at least another year. There is no imminent expectation of a change from Washington on that. * 10 Cheap Stocks to Buy Under $10 Fundamentally, Canopy Growth stock is not cheap. It still loses a lot of money and sells at astronomical multiples of its total revenues. So it needs a massive change to occur in order to set those metrics back in line with what Wall Street investors expect from a growth company. This is a lot to ask from a company who still has an interim CEO. It is safe to say that these companies won't be on the 13-F from Warren Buffett's Berkshire Hathaway anytime soon.The thesis for cannabis applications is still viable. There is no denying that the world wants it. Mainstream companies are itching to offer cannabis infused products of all kinds. In addition to the traditional uses, edibles are already popular. Then there is the potential for "drinkables" as they are supposed to give beer and wine a run for their money. CBD-infused topicals are already very popular to an almost ridiculous level.It's not a magic potion, yet the public thinks it has healing powers for humans and pets. Unlike on Wall Street, the cannabis mania on main street is still high. It Is Not Easy to Like CGC StockCritics of the cannabis segment make valid points and it's up to the companies like CGC to prove them wrong. The legislation efforts may fade from here since the tax revenues have failed to meet expectations. The black market is still strong. It still is cheaper to trade pot through illegal venues thereby circumventing the state income.As for the reaction to the CGC earnings, the experts are still split. The fans will continue to be fans and the critics will not change sides on this report. Management missed earnings and the sellers punished the stock hard. Investors didn't care much for management saying that the challenges are short term. They also need to get the C-suite in order after a tumultuous year for them. * 7 Stocks to Buy With Great Charts The bottom line is that beauty is in the eye of the beholder for Canopy Growth stock. It has nothing going for it now so it is easy to hate on it. But this is when the pool of sellers empties out and stocks find bottoms. It's just not a hard line in the sand. Those who brave new long positions here should also use specific stops. I would prefer a test long near $14 because this is a stand out spike from mid November of 2016. It stood for a whole year before the bulls broke through it. These pivot zones usually provide support on the way down.It is important to note that last night, ACB also reported earnings and the slaughter in pot stocks continues this morning. ACB confirmed a lot of the fears. While ACB medical applications were barely up year over year, their retail was cut by a third. They also announced efforts to fortify their balance sheet and this includes cutting back on expansions. They wouldn't do that if things were looking promising. These are not signs of a growing industry. It looks more like an industry in crisis to justify its very existence. So buyers in CGC stock need to beware. Conviction in the trades here is medium at best.Nicolas Chahine is the managing director of SellSpreads.com. As of this writing, he did not hold a position in any of the aforementioned securities. Join his live chat room for free here. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Silver and Gold Stocks to Buy That Offer Contrarian Upside * 7 Earnings Reports to Watch Next Week * 5 Online Retail Stocks to Buy on the Dip The post Canopy Growth Stock May Be Too Dangerous to Buy Now appeared first on InvestorPlace.
Amid a cash crunch, Hexo (NYSE:HEXO) stock continues its sell-off. The Gatineau, Quebec-based marijuana producer has seen its cash dwindle as investors have turned on the sector amid oversupply and vaping-related issues. As a result, a company that once came close to becoming profitable now looks more like a sinking ship. Unless and until Hexo stock can improve its cash situation and establish a bottom, investors should stay away.Source: Shutterstock I'm forced to offer a mea culpa on Hexo stock. I had considered HEXO one of my favorites of the non-top-tier marijuana stocks.After all, they have a strong base in their home province of Quebec, which constitutes about 21% of Canada's population. Also, they established an alliance with Molson Coors (NYSE:TAP) to produce cannabis-infused beverages following their recent legalization in Canada. On top of that, they had been on track to turn a profit.InvestorPlace - Stock Market News, Stock Advice & Trading TipsThe latest earnings report changed that. HEXO plummeted by 23% in one day as the company dramatically lowered fourth-quarter guidance and withdrew guidance completely for fiscal 2020. * 7 Silver and Gold Stocks to Buy That Offer Contrarian Upside The actual earnings release for the fourth quarter later in the month led to a further decline. The stock price has now fallen by more than 46% in a little more than a month.Outside of the company, the vaping crisis has contributed to its problems. Though the latest evidence points to black-market vape pens, the entire industry has suffered.Moreover, the Canadian market faces a massive oversupply. Thanks in part to high taxes and tight regulation, many consumers continue to turn to the black market. As Josh Enomoto mentioned, illegal weed makes up about 60% of the market. Now, the company ceased production at one facility and took 200,000 sq. ft. offline at its main facility in Gatineau, Quebec. HEXO Low on CashTop executives have left the company, including the CFO, who left soon before Hexo issued guidance. The timing for this is not fortuitous as the company faces a cash crunch. It currently holds about CAD$139.51 million in cash. Since it lost CAD$81.56 million in the last quarter, the company needs to find funding quickly.As Wayne Duggan pointed out, the CAD$70 million it raised through a 7% dilution will not get it through a quarter as its current burn rate. The CAD$30.26 million in long-term debt is not high, considering its CAD$776.76 million in equity.Still, without a dramatic cut in losses, that option appears limited as well. Further, the deal with Molson Coors is not the kind of investment that Constellation (NYSE:STZ) has made in Canopy Growth (NYSE:CGC). Hence, Hexo is not equipped to weather this crisis as well as Canopy or other top-tier weed stocks.Have I given up all hope? Not yet. However, it appears to have entered a "blood in the streets" moment. The question has become whether Warren Buffett-like investors will buy into this crisis. I think maybe, but not yet. Hexo stock trades near its 52-week low. Only rarely are such points a good time to buy. Unless it finds a floor somewhere above $0 per share, investors probably should watch HEXO instead of buy. The Bottom Line on Hexo StockUnless and until the HEXO finds a floor, investors need to stay on the sidelines. The outlook for Hexo stock has turned dramatically negative over the last few months. Hexo look poised to become profitable a few months ago. Its substantial market share in Quebec and deal with Molson Coors appeared to point to a bright future.However, thanks to a marijuana supply glut and concerns over vaping, instead, the company faces a cash crunch. With the Hexo stock price now below $2 per share, further dilution is not much of an option.Also, even with low liabilities, debt financing can only help them sustain quarters like the previous one for a limited time. Hexo is not dead yet. However, if it saves itself, it will not happen without more pain.As of this writing, Will Healy did not hold a position in any of the aforementioned stocks. You can follow Will on Twitter at @HealyWriting. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Silver and Gold Stocks to Buy That Offer Contrarian Upside * 7 Earnings Reports to Watch Next Week * 5 Online Retail Stocks to Buy on the Dip The post Hexo Stock May Be Fast Approaching Its Blood-on-the-Streets Moment appeared first on InvestorPlace.
The marijuana company has put the brakes on much of its capital spending, part of an effort to conserve cash in order to survive until its operations make a profit.
Hexo (NYSE:HEXO) stock is nearing the danger zone. Since Nov. 7, the HEXO stock price is down 10%. That's the continuation of an ongoing slide. In the last six months, the stock is down over 70%.Source: Shutterstock Some of this drop is due to investors' ongoing retreat from cannabis stocks. HEXO for the most part has not been tainted by a particular scandal. However, like all the cannabis stocks, they have yet to show a profit. And with full legalization still some time away in the U.S. (not to mention the unknowns regarding regulation), investors are backing away from this industry.However, a greater concern regarding HEXO is investors struggling to understand exactly what the company is and where it fits in the cannabis sector. And that is leading to the larger question of whether or not the company will be acquired. As I look at HEXO, I see acquisition as not only probable, but likely.InvestorPlace - Stock Market News, Stock Advice & Trading Tips HEXO Is the Goldilocks of the Cannabis SectorThe term "Goldilocks" is colloquially used to describe an economy that is not too hot and too cold. If you'll indulge me, I'm borrowing the Goldilocks word to describe HEXO. I believe that the company is in an interesting space in the cannabis sector. It's not large enough to compete with the big producers like Canopy Growth (NYSE:CGC) and Aurora Cannabis (NYSE:ACB). However, the stock is not so small as to be irrelevant. * 10 Cheap Stocks to Buy Under $10 The cannabis sector is about to embark on a consolidation phase. As the cannabis market emerged, many companies popped up. Many have and will fail. Others, like Canopy and Aurora have a lot of cash that ensure they will be part of the next stage of the business cycle. HEXO Is Not a Significant ProducerHEXO is not a major producer of cannabis. And frankly, their attempt to increase their production capacity is causing problems to the company's balance sheet. During their 2019 fiscal year, the company purchased 25 million CAD of dried cannabis to keep up with demand. The company subsequently wrote down that purchase to 8.1 million CAD.Write-downs like that are one reason that the company continues to report steep losses even as revenue is slowing. For example, in their most recent quarter, HEXO was expecting net revenue to come in around 14 million CAD to 18 million CAD after accounting for returns and retroactive inventory adjustments. HEXO Has Some Compelling PartnershipsBut HEXO has never been a major cannabis producer. And they haven't wanted to be. Instead, HEXO has focused on trying to form partnerships to get products to market. This is presenting two opportunities for HEXO stock to grow in the short term. But it's these same opportunities that make HEXO a desirable addition for another cannabis company.HEXO has a joint venture with Molson Coors Brewing (NYSE:TAP). The venture, called Truss has a partnership to produce Flow Glow, which is essentially cannabis-infused water (albeit in miniscule amounts). But HEXO is not alone in this space. Tilray (NASDAQ:TLRY) has a partnership with Anheuser-Busch (NYSE:BUD) and Canopy has its much publicized partnership with Constellation Brands (NYSE:STZ).And in May 2019, HEXO made an acquisition of its own with its 263 million CAD purchase of Newstrike Brands. Newstrike is the parent company for Up Cannabis, a brand that is gaining traction in Canada and could provide some growth. One of the reasons HEXO made this deal was the opportunity to increase its production space. * 7 Food Stocks to Buy Now But here again, chasing production is a double-edged sword. As I pointed out above, trying to increase their cannabis supply is part of what's leading to write-downs and losses. Those losses are beating up the stock price. In fact, the 1.8 million square feet of cultivation space that HEXO gained from the Newstrike deal is currently shuttered as part of their cost cutting plan. HEXO Has a Limited Path to Growth on Its Own MeritsHEXO is an intriguing cannabis company because it looks like it's at least attempting to get its balance sheet right. But being financially responsible is not giving it the opportunity to be a major player on the production side. And it may find that there just isn't a niche in which they can find a truly competitive advantage.But they are not insignificant, and they may very well prove to be a takeover target as the industry begins to consolidate. As recently as November 2018, Hexo CEO Sebastien St-Louis announced the company was on sale for the right price. However, with HEXO stock sinking below the $2 mark, there may be no time like the present for companies who are looking to buy the cannabis firm.As of this writing, Chris Markoch did not have an interest in the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Cheap Stocks to Buy Under $10 * These 10 Stocks to Buy Make the Perfect 'Retirement' Portfolio * 5 Streaming Stocks to Buy for Huge Upside Over the Next Decade The post HEXO Stock Is Primed for an Acquisition Now appeared first on InvestorPlace.
The world’s largest cannabis company by market value, Canopy Growth Corp., said Thursday that it lost C$26.9 million ($20.3 million) on returned cannabis oil products that retailers in Canada did not want. U.S.-traded shares of Canopy Growth (CGC)(CA:WEED) fell 13.7% in late afternoon trading Thursday. For Canopy Growth’s fiscal second quarter, the miscalculated demand for oil will cost the company C$32.7 million in revenue, bringing the company’s fiscal second-quarter sales to C$76.5 million, excluding excise taxes.
It's been a rough 2019 for Canopy Growth (NYSE:CGC) stock. But the launch of the company's "Cannabis 2.0" products next month could change that. Canopy and the pot space at-large could rebound if sales of beverages, edibles, and vapes live up to expectations.Source: Jarretera / Shutterstock.com But is this enough to move the needle for Canopy Growth stock? Even after a nearly 65% decline from its 52-week high, shares trade at a high valuation. Strategic partner Constellation Brands' (NYSE:STZ) multi-billion dollar investment provided a cash cushion. However, as the company burns through cash, Canopy could eventually need additional capital infusions.The pot space is betting big on "Cannabis 2.0". Does this mean its time to buy ahead of launch? Don't bet the ranch. While the shellacked share prices of pot stocks could rebound, all bets are off regarding upside.InvestorPlace - Stock Market News, Stock Advice & Trading TipsBut before we get to what will be, let's review what was. No Escaping a Terrible QuarterShares of Canopy Growth dropped to a two-year low yesterday after the company reported a weaker-than-expected $374.6 million net loss in its fiscal second quarter. It seems consumers lost interest in cannabis in the period, leading CGC to report $47.9 million in charges, including a $15.9 million inventory write-down.To be sure, net revenue in the quarter tripled YoY to $76.6 million, compared with $23.3 million in the same quarter last year, but it was off from Q1's $90.5 million.What happened? Acting CEO Mark Zekulin blamed Ontario's slow intro of pot retail stores as the biggest contributor to the miss. The province is the country's biggest market , so that's gotta hurt. He's been quite vocal with authorities about green lighting more legal locations, but it seems to be falling on deaf ears -- "Eh?"."Why it's not just happening right away, I do not know," Zekulin told BNN Bloomberg.He isn't expected to be "acting" much longer, as Canopy is reported to be zoning in on a permanent replacement for ousted co-founder and former CEO Bruce Linton.Now, as I was saying … let's take a closer look at CGC stock, and see why Cannabis 2.0 may not be enough to save the stock. * 7 Large-Cap Stocks to Give a Wide Berth Cannabis 2.0: Reality vs. Hype for CGC StockCanada legalized recreational marijuana sales last year. The "2.0" of legalization came just last month, with the regulatory green light for CBD- and THC-infused drinks, edibles and non-flower products.With Canopy's launch of Cannabis 2.0 products coming on schedule for early December, we are getting a clearer picture of the new product launches. A few weeks ago, Barron's took a look Canopy's upcoming products. The company is launching 13 cannabis-infused drinks, a line of cannabis-infused chocolate, as well as vape products.Is there demand for these products? Some 60% of cannabis users, and 80% of non-users want to try out infused beverages. With the drinks offering a low-THC buzz, they could be an alternative to alcoholic beverages like beer and wine.Cowen analyst Vivien Azer is bullish about Cannabis 2.0's impact on the industry. She projects these products could produce $2.3 billion CAD ($1.7 billion) in annualized sales by next year. But will this translate into revenue growth for Canopy? The company faces heavy competition in the beverage, edibles, and vapes space. Competitors like Hexo (NYSE:HEXO) have beverage launches of their own. Meanwhile, in its earnings report, the company said it used $404.7 million in cash, mostly for its operations, along with the construction of its manufacturing and beverage production facilities.While beverages are a big part of the Canopy Growth stock story, the company is pursuing other growth opportunities. Recently, Canopy announced a partnership deal with Drake. But this celebrity "cannabis wellness" venture may not be a slam dunk. Canopy's past celebrity partnerships have failed to pay off. These sorts of deals are good PR, but probably won't move the needle.Regulatory red tape remains a big headwind. A lack of retail locations makes it tough for companies like Canopy to unload swelling inventories. There's a lot at play for the future of CGC stock, and not all of it hinges on "Cannabis 2.0".With these risks and opportunities, is Canopy Growth stock priced for a contrarian bet? Let's look at valuation, and see if today's price presents a strong entry point. Canopy Growth Stock Richly Priced Relative to PeersUsing the enterprise value/sales (EV/Sales) ratio, CGC stock remains more expensive than most of its peers. Canopy trades at an EV/Sales (trailing 12 months) of 26.5x. Aurora Cannabis (NYSE:ACB) trades at trailing 12 month (TTM) EV/Sales ratio of 20.6x. Aphria (NYSE:APHA), Tilray (NASDAQ:TLRY), and Hexo all trade at lower TTM EV/Sales ratios than Canopy. Only Altria (NYSE:MO) backed Cronos Group (NASDAQ:CRON) trades at a higher valuation (TTM EV/Sales of 37.6).But Canopy's premium to ACB, APHA, TLRY, and HEXO could be justified. Like Cronos, Canopy is backed by a deep-pocketed partner. This provides the cash necessary to sustain operations as it scales to profitability. * 7 Great High-Yield Stocks With Payouts Over 5% As seen in my recent Cronos analysis, strategic partners can be a doubled-edged sword. With Cronos, Altria has incentive to drive the company's share price lower, allowing it to take it over on the cheap. The same situation could occur with Canopy Growth stock. If shares fall further, Constellation can step in and acquire a larger share of the company at lower prices.Constellation also has the opportunity to capture much of Canopy's potential upside. The beverage giant holds multiple tranches of warrants. The first tranche allows them to buy 88.5 million shares at $50.40 CAD a share. The second and third tranches allow them to buy 51.3 million additional shares at higher prices. With declines in the CGC stock price, Canopy extended the warrants' expiration date to November 2023 for the first tranche and November 2026 for the second and third.These warrants are priced at higher levels than Canopy's current trading price. But if the company rebounds, Constellation stands to reap much of the upside. Tread Carefully With CGC StockEven after falling from $52.74 per share down to below $20 a share, CGC stock is not cheap. High expectations for Cannabis 2.0 continue to be priced into shares. Investors today can make a bet that infused beverages and edibles pay off. But it's important to note the impact of Constellation's de-facto control of the company.So what's the play? Buy Canopy Stock if you're willing to stomach the risks. But other pot names selling at lower valuations may enable you to make that bet at a more reasonable price.As of this writing, Thomas Niel did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Cheap Stocks to Buy Under $10 * These 10 Stocks to Buy Make the Perfect 'Retirement' Portfolio * 5 Streaming Stocks to Buy for Huge Upside Over the Next Decade The post 'Cannabis 2.0' May Not Be Enough to Save Canopy Growth Stock appeared first on InvestorPlace.
When investors thought Canopy Growth (CGC) couldn’t report any worse numbers, the company shocked the market with another big miss. Digging into the numbers, the underlying trends were better than the headlines, but the leading Canadian cannabis LP has a long way to go before the business is supportive of the current valuation still around $5.2 billion.Big ChargesThe company officially reported FQ2 revenues of C$76.6 million. These revenues were hit by C$32.7 million in restructuring charges from returns and pricing allowances from the softgel and oil inventory and an inventory charge of C$15.9 million.These combined charges reduced gross margins by C$40.4 million. Without these charges, revenues were up 6% sequentially to C$118.3 million. The increase was entirely due to the boost in International medical revenues from the C3 and ThisWorks acquisitions.As some competitors had already reported, the Canadian market was a disaster in the quarter due to the expected inventory flood. Canadian B2B recreational revenues were down 15% sequentially and total gross Canadian cannabis revenues were down 7% to C$76.6 million before the charges and excise fees.Too Much Inventory For the September quarter, Canopy Growth completed a second quarter where harvests topped 40,000 kg. The problem here is kg sold were only 10,913 kg. The company sold 3% more product in the quarter while the business was built for at least double that product sales level.Technically, gross margins dipped to negative 13% in the quarter. Absent the adjustments, gross margins were 38% in the quarter. As well, the adjustment includes a C$10.5 million in costs for underutilized facilities.No matter how one wants to view the revenues and gross margins, Canopy Growth still has costs out of whack with the reality of the business. The company spent an insane C$160.3 million on operating expenses in the quarter, up from C$120.0 million in the June quarter. These expenses don’t even include the C$13.6 million charge for depreciation costs.The end result is an adjusted EBITDA loss of C$154.7 million, up from what appeared to be a large loss of C$92.0 million in the prior quarter. The end result was another sizable use of cash. Canopy Growth burned C$404.7 million during the quarter from the EBITDA losses and another C$228.3 million for capital spending.Even down at $15, the stock has a market value of $5.2 billion and quarterly sales in the C$100 million range. The enterprise value is $3.2 billion due to the $2.0 billion cash balance. The market has to carefully weigh the enterprise value considering the sizable cash burn could quickly dissolve this valuable asset.Analyst CommentaryCanopy Growth is like that driver motoring down the highway with the ever-blinking turn signal. Those following along behind are left wondering if that turn will ever come. Seaport analyst Brett Hundley doesn’t see a turnaround anytime soon. However, the analyst believes investors shouldn't count the embattled pot giant out of the game just yet.In a research note issued today, Hundley noted, "Thus far during CQ4, industry pricing is weakening further as more supply aims to funnel into a limited store set. This will be a major issue ahead, in our view, to include new 2.0 products. CGC projects that Ontario can potentially open 40 stores per month, starting in January, 2020. This seems overly optimistic [...] The company missed badly on fiscal Q2:20 EBITDA results, and it yanked Q4:20 sales expectations of $250MM while acknowledging current pressures across the marketplace. That said, its balance sheet remains robust, and the company remains well positioned to eventually take advantage of a longer-term reward. We lower EBITDA estimates and remain at Neutral." (To watch Hundley's track record, click here)TakeawayThe key investor takeaway is that Canopy Growth still needs to reign in global expansion plans to focus on areas where the company can generate positive cash flows. The FQ2 earnings report was horrendous with some sliver of hope due to the improved gross margins outside of the charges and adjustments.Due to the declining cash balances, investors should view a dip to $10 as very possible. A stock valuation of $3.5 billion makes far more sense considering the current operating losses and struggling revenue picture.To find better ideas for cannabis stocks trading at fair value or better, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Investors took pause on Thursday, as equities cooled off a bit and a few key earnings reports rolled in. Let's take a closer look at a few top stock trades going into the end of the week. Top Stock Trades for Tomorrow No. 1: Cisco Systems (CSCO)Cisco Systems (NASDAQ:CSCO) is getting hammered after reporting earnings. Shares are down more than 7% and have been for most of session.InvestorPlace - Stock Market News, Stock Advice & Trading TipsBelow $46 does not bode well for CSCO. That area has been support since August. A series of lower highs (blue line) was squeezing Cisco lower, but a positive earnings reaction could have ended that trend.Instead, support is giving way, opening the door to the 23.6% retracement at $43.55. If that doesn't hold, a decline into the $42.75 area could be next. * 10 Cheap Stocks to Buy Under $10 On the upside, see if CSCO reclaims $46. Above that level, the 50-day moving average is possible. Top Stock Trades for Tomorrow No. 2: Uber (UBER)Uber (NYSE:UBER) stock is just a hair above its 52-week lows. When Uber reported earnings earlier this month, we noted the decisive move the stock made through its recent lows.That set the tone for a collapse down to $25.58, the current all-time low. Just above that figure now, Uber is setting up for a make-or-break situation.Either the recent low holds as support and Uber rebounds or it doesn't and shares continue to break down. The stock is down almost 50% from the 52-week high of $47.08, and investors seem to want nothing to do with Uber.A look-below-and-fail is possible -- where Uber stock briefly breaks to new lows and snaps back -- but until shares are able to reclaim the $28.50 area, Uber looks unattractive on the long side. Top Stock Trades for Tomorrow No. 3: Canopy Growth (CGC)Just recently, we thought Canopy Growth (NYSE:CGC) could be putting in a bottom. Shares were finding support near $18 for about a month, and after a big rally, had actually taken out downtrend resistance (blue line).Now though, shares are being walloped on earnings, down more than 13%. The move sends Canopy to new 52-week lows and well below recent support.This one is a no-touch for me, as it is firmly in no man's land.If it can reclaim $16.75 -- a significant area on the multiyear chart -- then perhaps we could get a rebound back up to the 200-week moving average near $19.70 (not shown above). But wait to see the strength first, there's no need to be a hero. Top Stock Trades for Tomorrow No. 4: Roku (Roku)What a beast Roku (NASDAQ:ROKU) has been. The stock gave short-term traders an excellent red-to-green setup on Thursday morning, as it continues to move well from its post-earnings low.The August gap-up near $118 held on the post-earnings gap down last week. Since then, shares are up about $30 apiece.Now, $150 could either act as the brakes to the recent move or the accelerator back up to $160-plus. If Roku pushes higher, it would be encouraging to see $150 act as support on a pullback. If $150 acts as resistance now, see where buyers step in, perhaps at the 20-day moving average.Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell is long ROKU. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Cheap Stocks to Buy Under $10 * These 10 Stocks to Buy Make the Perfect 'Retirement' Portfolio * 5 Streaming Stocks to Buy for Huge Upside Over the Next Decade The post 4 Top Stock Trades for Friday: CSCO, UBER, CGC and ROKU appeared first on InvestorPlace.