First global marijuana company for medical purposes, Cover growth (NYSE: CGC), has just released its fourth quarter financial results, and the performance reaffirms its status as the best dog in this emerging sector. The results are particularly important as they include the first six weeks of sales of the new Canadian marijuana market for recreational purposes. Before buying shares of this great cannabis company, here's what you need to know.
1. Always the big kahuna
When the first competitor Aurora Cannabis (NYSE: ACB) announced quarterly results earlier this week and indicated that its share of the leisure market was 20% and that its sales represented 21.6 million Canadian dollars from its net sales amounting to $ 54 million. Canopy Growth has crushed those numbers.
Its $ 83 million business figure was 54% higher than that of Aurora Cannabis. In the past, Canopy Growth had estimated its medical market share to be over 30% and it appears that its performance is even better in the leisure market. Using Aurora Cannabis's 20% market share of recreation and leisure sales of C $ 21.6, we can estimate total leisure sales at around $ 108 million. Canopy Growth's recreational product sales were $ 57.7 million. Therefore, in light of the above, tablecloths, it absorbed 53.4% of the estimated adult market market in the last quarter.
2. The product range is improving
In the same quarter last year, Canopy Growth sold 2,330 kilograms of marijuana. In the fourth quarter, it sold at 10,102 kilograms, an increase of 335%.
Importantly, much of the marijuana sold was high-margin products. Specifically, soft oils and gels accounted for 33% of revenues for the period, up from 23% last year. In the marijuana market for medical purposes, these products accounted for 42% of the turnover. They accounted for 30% of revenue from the leisure market.
Increased revenues from soft oils and gels, as well as the possibility of selling fumes, beverages and edible products to Canada at some point, should help improve gross margins. After adjustment for non-farming affiliates and excise taxes absorbed, the gross margin was established at 40% last quarter. This is low compared to peers, but Canopy Growth believes that with the ramp-up of new facilities and the launch of value-added products, the margin will increase over time. In comparison, the gross margin of Aurora Cannabis was 54% in the last quarter.
3. US strategy stays on track
In January, Canopy Growth announced that it has obtained a license to process hemp products in the state of New York. She plans to invest up to $ 150 million to become an anchor tenant in an industrial park focused on hemp, at a location to be determined. During its results conference call, the company informed investors that it had identified the site of this industrial park and that negotiations were underway.
Management does not overlook what may be the first hemp products to be launched in New York, but suggests that health and welfare products for pets and humans be targeted, and if everything goes as planned, the first of these products could be available in New York by the end of 2019 or the first quarter of 2020.
With respect to expansion projects in other US states, President and CEO Bruce Linton said in the investor teleconference that it would be "sooner rather than later", but he also added : "It will depend on the policy."
Todd Campbell has no position in any of the actions mentioned. His clients can hold positions in the companies mentioned. The Motley Fool has no position in any of the actions mentioned. Motley Fool has a disclosure policy.