Why Canopy Growth, Aurora Cannabis, and HEXO Shares Are On The Rise Today

What happened

Marijuana stocks are up today. At 11:25 a.m. EST on Tuesday, Canopy growth (NASDAQ: CGC) was up sharply by 10.1% and cannabis competitors Aurora Cannabis (NYSE: ACB) and HEXO (NYSE: HEXO) were doing even better, each up 11.4%.

And the reason all of these stocks are doing well is Canopy itself.

So what

This morning, Canopy Growth announced its profits for the fiscal third quarter of 2021, claiming record revenue of C $ 153 million ($ 120 million), up 23% year-over-year , and anticipating that he will start turning his income into profits by the second half of the year. fiscal year 2022. Based on Canopy’s somewhat accelerated financial schedule, this means the company is only one year away from profitability. Canopy says he sees potential for cannabis reform in the United States that will help him achieve this goal.

This promise of profit in a year is implicit in the admission that Canopy Growth is not yet profitable today. The company’s gross profit margins plunged a full 15 percentage points in the third quarter of 2021, compared to the period a year earlier, reaching just 16%. Net losses jumped over 600% to $ 829 million.

And Canopy burned $ 135 million in negative free cash flow.

Now what

Despite all the negative numbers, Canopy Growth has expressed optimism for the medium-term future. He predicted that with the help of an opening of the US market, it will accelerate its revenue growth from the 23% rate set in the third quarter, to growth rates of 40% to 50% in fiscal 2022. in fiscal year 2024.

The company also predicted that it will achieve positive Adjusted EBITDA in the second half of 2022, positive operating cash flow by the end of fiscal 2023 and positive free cash flow in fiscal 2024. .

All of this news is specific to Canopy, so its promise of profitability in a year does not mean Aurora Cannabis and HEXO will become profitable alongside it as well. That being said, Canopy set the stage for Aurora’s earnings report, which is expected to arrive in the next few days, and HEXO’s report, likely due in late March.

Investors submitting these stocks today are hoping the news they are due to report will be at least as good as what Canopy just reported – and, hopefully, even better.