Earnings season is kicking into high gear and we expect to see the market respond negatively to companies that are releasing quarterly numbers that miss expectations. This statement rings true for the overall market as well as the cannabis industry and our readers need to be aware of the trend.
Earlier this week, a leading Canadian Licensed Producers (LP) released first quarter financial results and recorded a more than 100% increase in the amount of cannabis revenue when compared to the same period last year.
Although the growth that was reported was impressive, the numbers came in below expectations and the market punished the stock for the miss. Going forward, we expect to see similar responses from the market to Canadian LPs that do not beat expectations, and this is a trend to be aware of.
In the near future, companies like Canopy Growth Corporation (WEED.TO) (CGC), Aurora Cannabis Inc. (ACB.TO) (ACB), HEXO Corporation (HEXO.TO) (HEXO) and Aleafia Health Inc. (AH.TO) (ALEAF), are going to report quarterly financial results. We believe the market will hold these operators to high standards and would expect the stocks to be punished for missing expectations.
During the last month, the cannabis sector has been trending to the upside and we will monitor how the trend changes from here. Cannabis companies are no longer being touted for reporting strong revenue growth. We believe the market is more interested in how much money these companies are making or losing. Going forward, we expect to see the market respond well to companies that have been able to cut costs and expand margins.
Another trend that we expect to play an important role in the performance of the cannabis sector is related to US multi-state operators (MSOs). These companies have been ramping revenues and have been capitalizing on the US cannabis market. Starting this earnings season, we expect US MSOs to start reporting stronger revenue numbers than Canadian LPs and this is a trend to be aware of.
If you are interested in learning more about Canadian LPs and US MSOs that will be reporting earnings in the near future, please send an email to email@example.com with the subject “earnings” to be added to our distribution list.