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.
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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.
But before we get to what will be, let’s review what was.
No Escaping a Terrible Quarter
Shares 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.
Cannabis 2.0: Reality vs. Hype for CGC Stock
Canada 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,