On Monday, marijuana stocks were on fire, but Tuesday is mostly smoke and ash. At 9:45 a.m. EST, the industry giant’s shares Canopy growth (NYSE: CGC) are down 4.9%, while smaller Tilray (NASDAQ: TLRY) fell by 15% and Cannabis Aurora (NYSE: ACB) is down 21.6%.
I guess there are a number of theories as to why this might be: worried Democrats Will not do, in fact, sweeping the White House, the House of Representatives, and the US Senate, ushering in a whole new kind of “green” deal – or just the law of gravity, and knowing that what goes up must go down .
However, I prefer to think that whenever possible investors are reacting to facts rather than theories – and the point is these three cannabis companies reported profits yesterday.
And the fact as well is that these incomes were not excellent.
Let’s start at the top (by market cap) with Canopy Growth and its Q2 2021 results released before the market opens yesterday. On the one hand, Canopy Growth reported second-quarter revenue of $ 102 million, 75% ahead of the second quarter of last year (according to data from S&P Global Market Intelligence) and well in ahead of Wall Street estimates. In contrast, Canopy Growth continued to lose money – $ 24 million for the quarter – and burn cash. Negative free cash flow for the quarter was $ 143 million.
Aurora Cannabis numbers were almost a mirror image of what we saw at Canopy – and even worse for investors. Instead of increasing, sales stagnated and fell 10% year over year to $ 51 million. Net income a year ago fell to a net loss of $ 81 million in Aurora’s fiscal first quarter of 2021. And free cash flow, while less negative than a year ago, was still pretty negative at $ 93 million.
Finally, Tilray’s results looked a bit more like Canopy than Aurora’s. Sales increased, albeit less than 7% to $ 51 million. The losses were reduced, but the company still lost $ 2 million. And again, the size of the cash bonfire eclipsed the reporting results, as Tilray burned $ 26 million in negative free cash flow.
On Wall Street, those three stocks exploded yesterday and, in the face of such enthusiasm, the only stock analysts were willing to criticize in public was Aurora Cannabis. Specifically, investment bank Stifel Nicolaus called the report “negative”.
But even then, Stifel wasn’t ready to come out and tell investors to take profits on Aurora, despite the stock rising 137% in one week.
Today, however, investors seem to be rethinking that advice. In the last 12 months reported, months in which the sale and use of cannabis was legal in Canada and many US states, Tilray still managed to lose $ 488 million, Canopy Growth 1,2 billionand Aurora Cannabis $ 2.6 billion.
Legalization of marijuana in the rest of the United States could change that – or not – and in any case, with Senate oversight still uncertain, there is no guarantee that nationwide legalization will happen. effectively. With the prospect of months, quarters and maybe even years of losses ahead, taking some profit off the table after yesterday’s incredible rally seems like a very good idea to me.