Canopy jumps 20% after exceeding expectations across the board

(Bloomberg) – Canopy Growth Corp. Pre-market trade grew 20% after the world’s largest cannabis company by market value reported quarterly results that broadly exceeded expectations.

Canopy reported a 62% increase in net sales compared to the previous quarter to $ 123.8 million, well above the consensus estimate of $ 105.4 million. Gross cannabis sales grew 8%, and Canopy announced that it had a top market share in the quarter ended December 31 and 22% of Canadian sales came from leisure pots.

Adjusted Ebitda loss of $ 91.7 million was $ 64 million less than the previous quarter and exceeded the average analyst estimate of a loss of $ 110 million.

The results, which set a completely different tone than Aurora Cannabis Inc.’s earnings on Thursday, caused cannabis stocks to rise Friday morning. Tilray Inc. grew 6.6%, Aphria Inc. 8.2% and Cronos Group Inc. 7.1%.

Canopy reduced its operating costs by 14% in the quarter and increased its gross margin from minus 13% in the previous quarter to 34%.

“We saw a significant gross improvement in the third quarter due to higher sales and higher capacity utilization,” CFO Mike Lee said in a statement. “The measures taken earlier this year are expected to significantly reduce share-based compensation in fiscal year 21, and we have started to introduce stricter cost controls across the company.” Further cost-cutting measures are planned.

Bill Kirk, an analyst at MKM Partners, described the Ebitda beat as “surprising” given the cost of preparing to launch new legal products in Canada, including drinks, groceries, and vapes.

“We expected little improvement over the previous quarter, but Canopy is making significant progress,” Kirk wrote in a note. “However, the path to profitability remains very unclear.”

To contact the reporter about this story: Kristine Owram in New York at kowram@bloomberg.net

To contact the editors responsible for this story: Brad Olesen at bolesen3@bloomberg.net, Steven Fromm

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