Canopy Growth (TSX:WEED) (NYSE:CGC) is the biggest cannabis company in the industry by market cap, but it has struggled for many months now, and that has been reflected in its stock price. In the first few months of the year, the Canopy stock tanked by more than 50%, and recently, it declined by 16.6%.
Earnings Recap
The company recently released its financial results for the fourth fiscal quarter, and that did not help the matter either. Revenues dropped by as much as 13% on a sequential basis to C$107.9 million, and the primary reason for the drop was due to the poor sales performances in the recreational cannabis market in Canada.
David Klein, the Chief Executive Officer, stated that Canopy lost market share in Canada during the quarter. Losses came in at C$991 million, and on top of that, expenses rose by 288% sequentially to hit C$899.2 million. That being said, it is necessary to keep in mind that the demand for cannabis products has been on the rise since the middle of March. Experts even expect that the demand should be maintained or not drop significantly in the near term. If that happens, then Canopy Growth is well placed to take advantage.
While Canopy has been trying to reduce its cash burn under new CEO David Klein, it should be noted that it is the most cash-rich company in the industry. As of March 31, it had a cash balance of C$2 billion, and in a situation when many other companies are struggling with their finances, it is a significant competitive advantage. Due to such advantages, Canopy is currently regarded as one of the best stocks to own in the cannabis sector.
However, it should be noted that the cannabis space is expected to be volatile in the near future, and hence, there could be better options for investors. That being said, investors who can tolerate volatility and are intent on investing in the cannabis space could consider having a closer look at Canopy Growth.
