Investor Alert: Canopy Growth (TSX:WEED) Falls 15% in the Last Month and Aurora Cannabis (TSX:ACB) Reports a Disappointing Quarter
The Motley Fool
Published May 16, 2019 13:30
The S&P/TSX Composite Index is 2.5% below its highs at the time of writing today, as the broad market selloff continues.
With this, we are seeing increasingly nervous investors that are becoming more aware of the risks out there and less willing to overlook them.
As far as risk goes, the cannabis industry is certainly fraught with it, if only for the reason that this industry is new, so there will be growing pains, unexpected setbacks, and increased volatility in this growth stage.
Along with the huge potential for this industry, we get huge risks, and this makes sense because, as we know, higher potential rewards usually mean taking higher risk.
Let’s look at two of the biggest cannabis companies and get an update on them and their stock price performance in the last month or so.
Aurora Cannabis (TSX:ACB)(NYSE:ACB) Revenue in Aurora’s third quarter 2019 was 367% higher than last year and 21% higher than last quarter. Strong growth, indeed. The problem here, and the reason for the weakness in the stock price initially after the results were released, is that this revenue is below expectations, and this is a stock that is factoring in big expectations.
Aurora’s adjusted EBITDA loss of $36.6 million was an improvement but also below expectations. The company still expects to achieve positive adjusted EBITDA beginning in the fourth quarter of 2019.
In more good news, costs were down (by 26%), but offsetting this a bit was the fact that the selling price was also down (by 5.9).
At the time of writing, Aurora Cannabis stock is down more than 7% from April highs in a month that has seen much market weakness and a general nervousness in the market.
This, combined with Aurora’s latest results and the risks in its business and valuation, will likely take the stock lower over the shorter term at least.
Canopy Growth (TSX:WEED) (NYSE:CGC) Canopy Growth stock is down approximately 15% since mid-April at a time when general market weakness is taking hold amid trade tensions and stock markets that are still flirting with all-time highs.
Canopy Growth will be reporting its results on June 20, with consensus expectations calling for a loss of $0.23 per share. This compares to a loss of $0.31 in the same quarter last year and a loss of $0.38 last quarter.
Get The App
Final thoughts In closing, in an increasingly nervous market, cannabis stocks are not the best investments, especially when they are still trading at such lofty valuations and factoring in such aggressive growth targets.
Fool contributor Karen Thomas has no position in any of the stocks mentioned.
The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool Canada’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Motley Fool Canada 2019
This Article Was First Published on The Motley Fool
Written By: The Motley Fool
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.