Shares of Canopy Growth Corp. (CGC) are up today after the cannabis producer reported slightly better-than-expected fiscal third-quarter revenue and provided strong guidance for its American operations.
Cheaper pot prices in the Canadian market led the Smiths Falls, Ontario-based company’s cannabis business to post an 8% sales decline to $83 million in the quarter. However, Canopy said it is redoubling efforts to improve quality for its dried flower products while also focusing on its U.S. strategy.
Canopy’s road to the U.S. remains a hot-button topic for investors. The company has paid for options to buy multi-state operator Acreage Holdings and cannabis edibles maker Wana Brands once the U.S. legalizes pot, while also expanding its Biosteel sports drink, CBD vape, and Martha Stewart edibles product line.
In all, Canopy Growth reported an adjusted earnings loss of $67.4 million. Analysts polled by Bloomberg Markets had expected Canopy to post $137 million in revenue while booking a $65 million adjusted loss.
Also weighing on Canopy’s results was a decrease in the company’s gross margins, which fell to 7% from 16% a year earlier because of price compression in the Canadian cannabis market and higher supply chain costs.
The company isn’t providing any further clarity on when it expects to be profitable. The company’s cash reserves further declined by $1.4 billion. The cash burn was attributed to the company’s losses, capital investments, and the upfront option payment to acquire Wana Brands.
Canopy Growth’s stock rose 15% after the latest earnings were released. The company’s share price is now $8.85, down 83% over the past 12 months.