• CGC stock reported EPS of C$-1.46 on revenue of C$111.8 million.
  • Wall Street had expected adjusted EPS of C$-0.21 on revenue of C$130 million.
  • Canopy Growth share price is down 77% over the past year.

Canopy Growth (CGC) stock is down 11.9% at $4.89 in Friday's premarket after releasing earnings before the market opened that drastically underperformed expectations. The Canadian cannabis producer, which once traded above $59 a share, has been laid low by reporting earnings per share (EPS) of C$-1.46 on revenue of C$111.8 million. Wall Street had expected an EPS loss of C$-0.21 and revenue near C$130 million.

CGC stock advanced a whopping 10.3% on Thursday as life returned to riskier stocks and traders bet on a Friday earnings beat, the earnings miss was greatly unexpected.

Canopy Growth Stock News: Revenue falling

Canopy's revenue dropped nearly 25% YoY, a result that had been somewhat hinted at by Alliance Capital Partners earlier in the week.

"Achieving profitability is critical and we have undertaken additional initiatives to streamline and drive efficiencies for our global cannabis business," said CFO Judy Hong. "In FY2023, we are focused on executing our path to profitability in Canada, while we continue to invest in high potential opportunities – particularly in BioSteel, and further developing our US THC ecosystem, which we believe remains significantly under-appreciated by the market."

Through a restructuring that was previously announced, Canopy said they see COGS savings (cost of goods sold) in the realm of C$30 to C$50 million and SG&A savings between C$70 to C$100 million over the next 12 to 18 months. They are going to require a lot more than that to make a profit however. The reported quarter had a net loss of more than C$578 million.

"Canopy Growth is building the industry's leading portfolio of premium brands across North America," said CEO David Klein, who joined the company last year from beer and spirits giant Constellation Brands. "We've taken concrete steps to advance this ambition by strengthening our positioning in Canada, and further bolstering our U.S. THC ecosystem through the addition of two high performance brands in Wana Brands and Jetty Extracts. In the fiscal year ahead, we will remain focused on growing our market share in the key segments that will drive profitable growth and continuing to scale our premium brands across North America."

Alliance Capital Partners' Aaron Grey lowered his firm's price target from C$11 to C$8 on CGC stock, saying that he was concerned the corporation was losing market share. This last worry seems to have come to pass, although it is uncertain exactly where Canopy's market share currently sits along various segments. Grey did say he was interested in what management had to say on its recent investment in Jetty Extracts. Canopy invested about $69 million worth of cash and common stock to buy a 75% stake in the cannabis vape and extract producer based in California.

"There are significant opportunities for Jetty to scale at the state-level across the US by leveraging Canopy's U.S. ecosystem,” said Canopy CEO David Klein on May 18. “We're actively working on plans to bring the brand to the Canadian recreational market."

Canopy Growth Stock Forecast: Support at $4.70

Canopy has the word "Growth" right in its name, so it should surprise no one that this name has plummeted 77% over the past year as growth stocks have plunged in value due to rising interest rates and inflation.

With CGC stock dropping to $4.89 in the premarket, it looks nearly certain that CGC will find support around $4.70. This is the descending bottom trend line that began on March 8. If CGC stock falls below $4.70, then shareholders are in for some trouble as the stock will begin jostling around until it finds a new all-time low. CGC will not recover until it closes above $5.60 on the daily chart. This level may be months off as Canopy Growth will require some positivity around earnings in order to provoke any type of rally.

CGC 4-hour chart

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