- Canopy Growth on Friday reported a smaller-than-expected loss in the third quarter.
- The Canadian pot producer kept a tight lid on costs amid growing investor pressure to turn in a profit.
Canopy Growth reported a smaller-than-expected loss in the third quarter on Friday, as the Canadian pot producer kept a tight lid on costs amid growing investor pressure to turn a profit, sending its shares up 20%.
The company, whose operating costs fell 14% from the prior quarter, said it would take further steps to cut costs and streamline its business.
More than a year after Canada’s legalization of recreational weed, most producers have failed to turn profitable because of fewer-than-expected retail stores and oversupply issues.
To pacify investors, pot producers have started the year by announcing a range of cost-cutting measures. Last week, Aurora cut 500 jobs and Tilray about 140 jobs, or about 10% of its total workforce.
Last year, major shareholder Constellation Brands pushed its finance head David Klein to take the helm at Canopy, months after the Corona-beer maker expressed disappointment over heavy losses the pot producer reported in 2018.
“Actions taken earlier this year are expected to meaningfully reduce stock-based compensation in FY21, and we have started to implement tighter cost controls across the organization,” Canopy Chief Financial Officer Mike Lee said in a statement.
Excluding items, Canopy’s loss of 35 Canadian cents per share in the third quarter ended Dec. 31 was smaller than the average analyst estimate of 49 Canadian cents.
Its net revenue of C$123.8 million also beat estimates of C$105.1 million, according to IBES data from Refinitiv.
Canopy said its cash and cash equivalents were C$1.56 billion at Dec. 31, down from C$2.48 billion at March 31, 2019.
“The Canadian market is difficult, with development trailing all initial expectations, but Canopy’s results showcase stronger execution, providing initial evidence of an enduring right to win as the category accelerates,” Stifel analyst Andrew Carter wrote in a note.