BioTech

Canopy Growth needs another 3-5 years to turn profit

Credit: REUTERS/Chris Wattie

Canopy Growth Corp said on Thursday it expects another three to five years to turn in a profit as Canada's largest cannabis company invests heavily to diversify and expand.

By Taru Jain

Aug 15 (Reuters) - Canopy Growth Corp WEED.TO said on Thursday it expects another three to five years to turn in a profit as Canada's largest cannabis company invests heavily to diversify and expand.

U.S.-listed shares of Canopy CGC.N fell as much as 14.5% to $27.30, a day after the company reported disappointing quarterly results.

As marijuana companies spend heavily, investors have been worried about their ability to post a profit, even as their top lines surge.

Canopy posted a C$1.2 billion loss and lower-than-expected sales for the first quarter, joining rivals Cronos Group CRON.TO and Tilray TLRY.O which recently reported wider quarterly losses.

Brokerage BMO Capital Markets in a note cautioned that Canopy's earnings would further deteriorate as it looks to launch cannabis products, resulting in significant working capital investment and operating expenses.

On an earnings call with analysts, Canopy on Thursday also flagged less store counts in key provinces like Ontario, adding to growing concerns about oversupply in the nascent Canadian market.

"Retail footprint evolution in Canada is clearly a big storyline for (Canopy) and the industry itself. We expect (Ontario) and (Quebec) to take time reaching footprints that we deem appropriate," Seaport Global Securities analysts wrote in a note.

Canopy also said it lost market share in the recreational products market and its overall revenue growth slowed in the first quarter from the fourth.

Chief Executive Officer Mark Zekulin said on the call that Canopy got off to a strong start when Canada legalized recreational marijuana in October, but has lost share in the last eight months as rivals ramped up supply and the company focused on modifying its production base.

(Reporting by Taru Jain in Bengaluru; Editing by Maju Samuel)

((Taru.Jain@thomsonreuters.com;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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