Black Thursday in The Cannabis Sector

It was a black day for the cannabis sector today after numerous firms reported declining quarter over quarter revenues in the space. While expectations were not high for earnings in general as we entered earnings week for many of the majors, the results have nonetheless been disappointing for those invested in the sector.

Earnings to say the least, have been painful. Many producers have experienced sharp multi digit percentage drops in terms of revenue on a quarter over quarter basis, and the markets have reacted accordingly. The result is that the entire sector was painted red today, even for those that have yet to report, helped in part by Canopy Growth (TSX: WEED) (NYSE: CGC) and the significant loss posted for the period ended September 30, 2019. The issuer today shaved over $1.21 billion from its current market capitalization after the firms dismal earnings.

Here’s a quick run down on revenues posted by some of the better known names within the sector, and the figures they reported this week relative to last week.

• Canopy Growth (TSX: WEED) (NYSE: CGC) – Net revenues of $76.6 million, down 15% from $90.5. Net loss of $374.6 million.
• Aurora Cannabis (TSX: ACB) (NYSE: ACB) – Net revenues of $75.2 million, down 23% from $98.9 million. Net income of $10.3 million.
• Zenabis Global (TSX: ZENA) – Net revenues of $12.0 million, down 52% from $24.7 million. Net loss of $5.8 million.
• Supreme Cannabis Company (TSX: FIRE) – Net revenues of $11.4 million, down 40% from $19.0 million. Net loss of $16.5 million.
• Cronos Group (TSX: CRON) (NASDAQ: CRON) – Net revenues of $13.3 million, up 24% from $10.8 million. Net income of $787.9 million.

With the major miss announced this morning by the purported leader, Canopy Growth, followed by the significant decline in sales posted by Zenabis Global, the markets reacted against the sector as a whole accordingly, with the color green being a rarity within the space.

The capitulation seen within the sector today was captured well by Twitter user @WeedStreet420, who compiled the following data to present it in a visual format.

With the dismal earnings reported after hours by the likes of Aurora Cannabis, Supreme Cannabis, and The Green Organic Dutchman today, the prospects for tomorrows trading session aren’t much brighter. The fallout experienced after hours of Aurora, who is currently down close to 13% in the extended session is likely to carry through to tomorrow.

It appears that the prospects of cannabis equities trading on actually fundamentals, after all, is a very frightening reality.

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Information for this analysis was found via Sedar and The Toronto Stock Exchange. The author has no securities or affiliations related to the organizations explicitly mentioned. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security.