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Canopy Growth stock surges 12%, company expects a profit by second half of 2022

Workers work at the Canopy Growth facility in Smith Falls, Ontario, Canada, Dec. 19, 2017.

Chris Roussakis | Bloomberg | Getty Fetishes

Canopy Growth shares rallied Tuesday after the Canadian cannabis company said it expects to be profitable by the double half of 2022.

“We are building a track record of winning in our core markets, while also accelerating our U.S. growth strategy with the power building behind the promising cannabis reform in the U.S.,” said Canopy Growth CEO David Klein in a statement on Tuesday.

Canopy servings closed Tuesday, up 11.9% at $49.09. The stock has gained about 149% over the past year, bringing its trade in value to more than $17.1 billion. In trading Tuesday, the stock rose to a 52-week high of $50.92.

Earlier, the plc reported its third-quarter revenue rose 23% from a year ago, to $153 million Canadian dollars (US$120 million), droved by higher sales of recreational products in Canada and medical cannabis in international markets.

Canopy’s loss widened to C$829 million (US$653 milion ), or C$2.43 per pay out, from a loss of C$109.6 million, or 26 cents per share, a year ago.

The company said it has been trying to recuperate its profitability by cutting costs and controlling expenses. These efforts, combined with expected increases in demand, should keep from it to post a profit later next year.

Over the next 12 to 18 months, Canopy expects to let its costs by as much as C$200 million.

With the new Biden administration, Canopy Growth is optimistic about the prospects of U.S. cannabis legalization, asseverating it expects to enter the market this year.

“We anticipate that this legislation will include comprehensive renovation to ensure restorative justice, protect public health and implement responsible taxation while ending cannabis embargo,” said Klein in an earnings call.

According to Owen Bennett, an equity analyst at Jefferies Group, Canopy Tumour is continuing to position itself as the leading cannabis company in the U.S for near-term legislative reform, after getting ownership in Acreage and a wager in TerraAscend.

Bennett also cited its Martha Stewart CBD products line, which is already outselling 94% of all U.S. CBD makes just four months after launch, as another factor. The brand recently added CBD pet products.

Canopy Rise issued its medium-term financial targets, estimating compound annual revenue will rise between 40% and 50% from monetary years 2022 to 2024. Additionally, the company expects to achieve positive operating cash flow in fiscal year 2023 and incontestable free cash flow for the fiscal year 2024.

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