http://business.financialpost.com/news/agriculture/canopy-growth-...

http://business.financialpost.com/n...after-it-reports-big-boost-in-customers-sales
Canopy Growth stock jumps after it reports big boost in customers, sales


Republish
Reprint
Sunny Freeman | November 14, 2016 4:42 PM ET
More from Sunny Freeman

Chris Roussakis for National PostInside Canopy Growth

• Twitter
• Google+
• LinkedIn
• Email
• Typo?
• More

TORONTO — Cannabis Growth Corp. shares shot up 20 per cent Monday, reaching a new high, after the medical marijuana company reported it quadrupled its registered patient base from a year ago, helping to boost sales.
Canada’s largest licensed marijuana producer reported income of $5.4 million for the three months ended Sept.30, its second quarter of fiscal 2017, up from $3.9 million in the year-earlier period.
Analysts had expected a loss of two cents per share, but Canopy delivered a gain of five cents per share, when factoring in a $16.1 million non-cash gain in the fair value of its biological assets.
Revenue rose 245 per cent from the year-earlier period to $8.5 million, while its number of registered patients grew 47 per cent during the quarter — to 24,400.
Related

• Canopy Growth is Canada’s first ‘cannabis unicorn’ with $1 billion valuation
• Canadian marijuana producers eye U.S. market to have their weed and smoke it too

But the company had $27.6 million in inventory, meaning second quarter sales amounted to just one-third of its total stock — a common problem in the nascent sector that is expected to persist until the market opens up to recreational use.
Sales were up 270 per cent for the six months of the year, compared to the first half of fiscal 2016. Meanwhile, income from operations fell about 60 per cent as it ramps up spending to help the company grow to meet anticipated future demand.
The diversified marijuana company, which owns a medical-focused subsidiary Bedrocan, as well as Tweed, a brand it is positioning for the coming recreational market, has ambitious growth plans.
“The whole sector is changing in a bunch of ways inside it,” CEO Bruce Linton told investors on a conference call.
“So I think you’ll see the positioning of the product mix, it really starts to look like more like you would expect out of the consumer packaged goods range of offering versus what started out as a pretty restricted medical offering.”
The company isn’t expected to have positive cash flow until next year, which is not unusual for young companies in the growth stage, said Khurram Malik, a marijuana sector analyst at Jacob Securities.
“Canopy has the ability to raise a lot of money, so they’re playing the long game,” he said. “They’re spending money to expand, they’re getting ready for what happens in the world in the next five or 10 years.”
The company, based in an old chocolate factory in Smith’s Falls, Ont., is capitalizing on its first-mover advantage to expand quickly to position itself as a dominant player when legislative changes expected in the spring legalize recreational marijuana use.
it really starts to look like more like you would expect out of the consumer packaged goods range of offering versus what started out as a pretty restricted medical offering.
However, its unclear what the recreational market will look like and how much of a role licensed producers will play. Producers are grappling with several unknowns including how products will be distributed—whether at single outlet like the LCBO – and what types of products they’ll be able to sell, such as gel tablets or vapourizer pens.
“The tension on the trade is always whatever we don’t do, the bad guys will keep doing,” Linton said.
Canopy has been providing input into a federal Task Force on Marijuana Legalization and Regulation, which is expected to release preliminary findings at the end of the month.
It announced this month a deal with the Goldman Group, its landlord for its Bedrocan properties, to acquire new properties across the country.
It’s also on a global expansion mission in the hopes of becoming one of the world’s first marijuana multinationals.
Canopy exported its first shipment to Germany during the quarter and also has partnerships in Australia and Brazil, through which it will export its expertise.
It is focusing on countries where marijuana is legal at the federal level so as to reduce risk. The U.S., where marijuana is considered criminal by the Federal Drug Administration, is not a priority for the company. Still, an election night push toward expanded legalization in eight states helped push Canopy’s market valuation north of $1 billion, making it a self-proclaimed “cannabis unicorn.”
Shares in Canopy, the first marijuana company to list on the Toronto Stock Exchange have been on a tear for the past year, up some 386 per cent. They closed at $11.16, up $1.82 or 19.49 per cent.
“It wasn’t that this quarter was that much of a superstar, it’s just another feather in their cap,” Malik said.
“Cracking through a billion dollars, that’s the bigger deal here and any marginal positive news will just be outsized because of this.”
The positive results at Canopy – considered a bellwether for the entire sector – were another piece of good news for a sector that has been gaining momentum since the federal Liberals first took office last October.
The news helped push other publicly-traded cannabis companies higher.
Financial Post