Cannabis stocks slammed as Canopy earnings disappoint

Cannabis stocks fell on Friday, led by Canopy Growth Corp., after the biggest company in the sector measured by market cap reported an unexpected decline in recreational pot sales in Canada in the fourth quarter from the previous one.

Jefferies analyst Ryan Tomkins said the losses should be no surprise given the sums the company has been investing, “but given the degree of the losses and the fact that profitability is becoming more of an investor focus, it is likely to cause concern,” he wrote in a note to clients. See: Corona-parent Constellation Brands to record $106 million loss as its share of Canopy Growth’s losses

Stifel analysts said the near-term execution issues were disappointing, if not surprising. Stifel is also a believer in the sector’s long-term potential and Canopy’s competitive edge, given its strong balance sheet, courtesy of a $4 billion investment from Corona beer distributor Constellation Brands Inc. STZ, -1.08% and the fact that it has just sealed a deal that will give it a foothold in the U.S.

In Oregon, Gov. Kay Brown has signed a bill that will address the oversupply in that market caused by an overly liberal licensing approval process, as Marijuana Business Daily reported. A cannabis glut has depressed prices in the state. Senate Bill 218 will allow the Oregon Liquor Control Commission to refuse to issue grower licenses until such time as supply and demand fundamentals improve.

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